Banks Acting Earlier to Curb Foreclosures

The Wall Street Journal reported last week that financial institutions like Citigroup and Bank of America are moving fast to prevent foreclosures and mortgage defaults among high-risk customers.  The focus of the banks’ attention: homebuyers with adjustable-rate mortgages.

Bank of America is going so far as to offer refinancing at little or no cost to borrowers to move them out of dangerous ARM loans.  Citigroup is taking a hands-on approach of contacting mortgage customers immediately upon missing a payment.  But the most drastic measure involves forgiving debt when sellers disposed of their property for an amount less than what they owe the bank.  This allows lenders to move through the process quicker and prevents consumers from having a foreclosure stamped on their credit reports.

Consumers are falling behind on mortgage payments faster and in greater numbers than ever before.  With the current environment of rising interest rates and declining home prices, many have no other option.

2.51% of mortgages were delinquent in the fourth quarter last year, according to Equifax and Moody’s.