Lenders Seek to Modify Rather Than Foreclose Mortgages


As home foreclosures mount, mortgage companies are knocking on doors, sending letters and making phone calls with a simple message for struggling homeowners: They’d rather modify your loan than foreclose.

EMC Mortgage Corp., specialist with a $78 billion portfolio of subprime loans — for homeowners with weak credit — this week launched a 50-person team it calls "the Mod Squad." Members will spend an unlimited time on the phone with troubled borrowers, sifting through their bills to compute a workable monthly payment. In an industry that often rewards workers for getting off the phone quickly, the team is preparing to speak to just three people a day.

"You can’t just run this like a call center; it needs to be run like a counseling center," said John Vella, president and CEO of EMC. Right now, $2.14 billion in mortgages, 2.74 percent of EMC’s portfolio, is in default, up from 1.93 percent a year ago.

Lenders have long modified loans for homeowners facing job loss, illness, divorce or a death in the family. But with many borrowers across the country struggling to keep up with mortgage payments, mortgage companies increasingly are prodding anyone who’s having trouble making payments for any reason to give them a call.

Critics say lenders made loans to borrowers who weren’t creditworthy with terms that would be impossible for them to meet. Whether the current wave of workouts will merely postpone foreclosures — and delay bad loans hitting lenders’ books — is an open question.

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