Freddie Mac, Roper Poll Survey Asks Why More Delinquent Borrowers Don’T Call Lenders For Help
December 12, 2005
Nearly Two-Thirds of Delinquent Borrowers Say They Are Unaware of Workout Options
McLean, VA – Freddie Mac and Roper Public Affairs and Media, a division of GFK NOP – a leading international market research firm, today announced the results of the nation’s first ever survey to learn why more late-paying borrowers risk losing their homes rather than reaching out to their mortgage servicers. The borrowers never contact their lender in over half of all foreclosure cases. The survey was undertaken to help find out why.
The Freddie Mac/Roper survey found that 75 percent of the delinquent borrowers surveyed recall being contacted by their servicers. But, a substantial percentage gave a variety of reasons for neglecting to follow-up with their servicers to discuss workout options. Mortgage servicers collect monthly housing payments on behalf of Freddie Mac or other investors.
Specifically, 28 percent said there was no reason to talk to their servicers or that their servicers could not help them, 17 percent said they could take care of their payment problems without any help, and 7 percent said they didn’t call because they didn’t have enough money to make the payment. Other reasons for not calling included embarrassment (6 percent), fear (5 percent), or not knowing whom to call (5 percent).
The lack of borrower follow-up may help explain why more than six in ten (61 percent) of late-paying borrowers said they were unaware of a variety of workout options that could help them overcome short-term financial difficulties. At the same time, 92 percent said they would have talked to their servicers had they known these options were available to them.
The Freddie Mac/Roper survey found no significant statistical difference in the responses given by white, black, Latino, male or female borrowers indicating an almost universal need for more borrower education about workout options and foreclosure avoidance.
Freddie Mac requires mortgage servicers to explore several workout options with late-paying borrowers. These options include forbearance, which temporarily delays or reduces payments, and loan modifications, which can restructure the payment terms for a fixed period. Many servicers typically describe these options in their collection letters. However, it is up to borrowers to follow-up with their servicers to learn more about these options.
“The results of the Freddie Mac/Roper survey are a wake-up call to delinquent borrowers everywhere,” said Ingrid Beckles, Freddie Mac’s Vice President of Default Asset Management. “Its message is clear: when you get a phone call or letter from your servicer, don’t ignore it, act on it. Pick up the phone, call your servicer and talk to them about the possibility of forbearance or some other repayment alternative because it just may be your best chance to avoid foreclosure.”
“Part of the problem is that the data shows that there’s a knowledge gap: People’s interest in the options available to them is quite high, but their awareness of these options is quite low.” said Elizabeth Armet, Vice President, Senior Account Executive at Roper Public Affairs.
While the likelihood of a successful foreclosure avoidance depends upon each individual borrower’s financial situation, a 2004 Freddie Mac study concluded that repayment plans could lower the probability of home loss by 80 percent among all borrowers and by 68 percent among low-to-moderate income borrowers. Working together, Freddie Mac and its servicers have helped more than 100,000 troubled borrowers avoid foreclosure and stay in their homes over the past two years. (Borrowers can find a comprehensive description of workout options at freddiemac.com)
“These findings are consistent with what Wells Fargo Home Mortgage has done and the great success we have had during the past several years with our early intervention process,” said Patrick Carey, senior vice president, WFHM Default and Retention Operations. “We try to educate customers to contact us early in times of financial crisis, and hope that they will learn from studies like these that their lender can be their best resource when financial strain threatens their homes,” Carey said.
“The Freddie Mac/Roper survey underscores why we work so hard to encourage borrowers experiencing financial difficulty to proactively contact their lender and explore the options that could help them avoid foreclosure,” added Deb Oakley, Senior Vice President at National City Mortgage. “At National City Mortgage, we also work with credit counseling agencies to further help borrowers learn how to take charge of their situation.”
Other notable findings from the Freddie Mac/Roper survey:
- Eighty percent of delinquent borrower households included at least one employed individual and only five percent said someone in their household was unemployed. Seven percent of the respondents said they were retired.
- Among homeowners in good standing, 62 percent were employed, 32 percent were retired, and only two percent were unemployed.
- Delinquent borrowers earned slightly less than borrowers in good standing. The median annual income among delinquent borrowers was $52,400 compared to $56,700 a year for homeowners in good standing.
- Forty seven percent of the defaulters were first-time homeowners but 62 percent of the homeowners in good standing had owned a home in the past.
Source: Freddie Mac