To keep Congress and state lawmakers at bay, the industry is scrambling to show it is helping struggling homeowners avoid foreclosure.
But so far the effort is backfiring.
News coverage of the 26-page report the Mortgage Bankers Association released Thursday was exactly what the industry did not want to see. The Washington Post went with this headline: "Foreclosures, Lenders' Preferred Fix."
It did not help that the next day the Hope Now alliance — of which the MBA is a member — unexpectedly released its own data. That two-page release reported data gathered from different companies reporting over a different period of time, making comparisons tough.
The MBA said it would no longer gather this data, turning the job over to Hope Now, which is still settling on definitions, such as what is a loan modification, and deciding what details will be reported. Hope Now expects to have its first comprehensive data out in March.
Still more data is expected at the end of this month from a group of state attorneys general. Led by Iowa Attorney General Tom Miller, they have collected data through Oct. 31 from 13 servicers operating in 11 states.
"I think by now we should have systematic reporting," California Assembly Banking Committee Chairman Ted Lieu said in an interview Friday. "There is no coordination. There seems to be a lack of transparency. The question is 'Is it intentional, or is it negligence?' I can't tell right now, but either way it's not very helpful."
Assemblyman Lieu is sponsoring legislation, approved by his committee Jan. 14, that would require state-licensed lenders and servicers to file detailed monthly reports on how they are helping borrowers. For instance, a servicer would not simply report the number of loans it modified; it would report the duration of the modification relative to the life of the loan, whether the interest rate was frozen or reduced, and whether principal balances were reduced.
That level of detail is not being reported yet.
"The various reports we're seeing now certainly have a political impact because industry advocates can point to data to point to their contention that they are trying to help troubled borrowers," said Jaret Seiberg, senior vice president of financial services policy for Stanford Group Co. "The real question is 'Is that enough to derail legislation?' And we don't think that any of these reports so far are enough to tip the balance politically."
Brian Gardner, an analyst with KBW Inc.'s Keefe Bruyette & Woods Inc., agreed with that assessment.
"I don't think it's enough to change minds yet. … It kind of looks nice on the surface, but in the great context of how big the problem is, it's still very, very modest," he said. "I think it's still a little too early to tell how successful this is going to be."
This debate started in September, when Moody's Investors Service Inc. said only 1% of subprime mortgage facing resets had been modified by servicers. The industry criticized the report as misleading, but Federal Deposit Insurance Corp. Chairman Sheila Bair latched on to it as evidence the industry was not doing enough to help homeowners.
Eventually the Treasury Department agreed and pushed the industry to help borrowers who were current on a subprime loan but facing an unaffordable reset. The interest rate on these loans would be frozen at the starter rate for five years. This deal covers loans scheduled to reset starting Jan. 1, 2008, so all the data coming out is about a much broader universe of mortgages.
Hope Now plans to issue a progress report in March on how well the fast-track framework is being implemented.
In the meantime, Moody's updated its figures last month and said that 3.5% of loans facing resets in the first eight months of last year were modified, and that nearly a quarter of seriously delinquent loans were worked out or changed.
To counter the Moody's findings, the MBA said 54,000 loans were modified and 183,000 loans received repayment plans during the third quarter. The Hope Now report found that nine servicers modified 120,000 loans and completed 250,000 formal repayment plans in the second half.
The report from the state attorneys general will include data on all loans serviced — both subprime and prime, those delinquent and at what level, and what loss mitigation efforts were begun and completed, according to Mike Stevens, senior vice president of regulatory policy for the Conference of State Banking Supervisors.
"At some point and time the researchers out there will have to start reconciling data, and then we will have it all figure out," he said.
Several states are working individually on their own efforts. Gov. Martin O'Malley of Maryland announced plans this month to require servicers in his state to report loan modification efforts.
At the federal level, Senate Banking Committee Chairman Chris Dodd has introduced legislation that would require lenders to report loss mitigation efforts three times a year to the Federal Reserve Board, which then would submit an annual report to Congress.
"Sen. Dodd believes that public accountability is a vital component of any effort to ensure borrowers are getting the loan modifications they've been promised," a spokesman said.
Servicers are complaining that the lack of coordination is putting a burden on their efforts to address these loans.
"It is very significant, a very operational challenge to do what they need to do … while at the same time report on that," George Miller, executive director of the American Securitization Forum, said in an interview Friday. "It would be very important and helpful for all concerned to try to centralize and coordinate the data as much as possible."
Mr. Miller also said the reporting is so difficult because the servicing industry has not been asked to do this record keeping before.
William Longbrake, the vice chairman of Washington Mutual Inc. and a policy adviser to the Financial Services Roundtable, admitted that the reporting to date has been uncoordinated.
"It's predictable when there's a high degree of focus everyone tries to get into the act and put out information," he said. "It's better to have information in the short run, even though it might be confusing. In the long run, I would hope we would begin to develop industry standards and get a reduced number of industry reports."
John Taylor, the president of the National Community Reinvestment Coalition, said the number of foreclosures, not loan modifications, will be the true measure of success.
"They can put all the numbers and praise and optimism they want out," he said. "The fact of the matter is the number of foreclosures are going to be the telling … so regardless of … taking different data and taking different terminology and coordinating it, at the end of the day it's either going to manifest itself in stopping the foreclosures, or it's not."
