Workouts Aren't Just for the Health-Conscious

The top mortgage-lenders in the country helped those in danger of foreclosure by offering financial counseling, short-sale assistance, and loan-modification.

By: Bob Nicholson

The second quarter of 2008 saw the mortgage industry take measures to curb the number of foreclosures impacting the market. The top mortgage-lenders in the country helped those in danger of foreclosure by offering financial counseling, short-sale assistance, and loan-modification. These steps, while not alleviating the underlying problem, do address the symptoms. They help to decrease the number of foreclosures that would be seen without the measures.

These “workouts” as they're called, include forbearance plans, where past-due money owed is paid back in installments. Also included are loan-modification agreements, where homeowners are often moved from a variable rate to a fixed rate loan. During these modifications, often the new closing costs, and the past-due amounts on the initial loan are added to the new loan amount, and paid over the term of the loan.

These “workouts” increased to more than half a million last quarter. That's up from about 483,000 the first quarter of the year. This is as a result of the increased oversight by federal regulators, and pressure from borrower's advocacy groups. For the first time since the crisis started, over half of the “workouts” offered in the second quarter were loan-modifications of existing sub-prime loans. With these measures comes renewed hope that the housing market may yet weather the storm which has caused housing prices to drop sharply from a year ago. Measures like these may give analysts hope that by the end of 2009, the housing market may be on its way to recovery.