North Carolina was able to help nearly 1,000 homeowners avoid REO properties for sale under the State Home Foreclosure Prevention Project. The program started seven months ago as an emergency response to over 6,000 homeowners in North Carolina who took out subprime loans and are facing the threat of losing their homes to foreclosure.
One of the components of the program is a loan modification which temporarily lowers the monthly payment of a distressed homeowner.
The REO properties for sale prevention program is a component of a North Carolina law, which was passed in 2008, that required lending institutions and banks to give a 45-day advance notice to borrowers of subprime loans.
The North Carolina Commissioner of Banks provides homeowners who are struggling to make their monthly payments access to housing counseling agencies that can help them apply and become eligible for loan modifications.
Since the REO properties for sale prevention program started, the commission was able to send about 50,000 letters to troubled homeowners. However, only 6 percent or about 3,000 have responded and are currently receiving assistance.
Chief deputy commissioner Mark Pearce remains optimistic that the 1,000 loans successfully modified and the 2,000 pending cases are signs that the program is working as intended.
He said that since the inception of the program, it has generated savings for the state of about $86 million by way of helping prevent the slide of home values and thus, stabilizing property taxes.
According to data, the number of foreclosure filings in North Carolina was reduced by almost 50 percent in November a year ago, a month after the project started. However, industry experts noted that last month, foreclosure filings in the state reached almost 5,000, prompting them to suggest that the program only works by temporarily delaying foreclosure.
Meanwhile, federal and state governments are encouraging lenders to modify loans of distressed homeowners to prevent foreclosures. Pearce pointed out that the loan modification process can be scary to some homeowners and some do not have the time to negotiate or are intimated by the thought of negotiating with mortgage companies.
But he believes that the project would be able to modify as many as 2,000 loans before the end of this year.
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