Consumer Law

Fitch Ratings: HOPE NOW not working

By Alan White

In a report dated March 25, 2008 (login required), Fitch Ratings has again revised (upward) its estimates of foreclosures and losses for subprime mortgages made in 2006 and 2007. The news is not good. Fitch reports that fewer homeowners who are behind are successfully catching up on payments ("rolling current") and far fewer are able to sell or refinance their homes to avoid foreclosure. Fitch predicts that 44% to 50% of 2006 subprime mortgages, and 40% to 45% of the 2007 subprime mortgages, will end in foreclosure and sale. It further predicts that loss severities will range from 56% to 64%. In other words, investors will recover 36% to 44% of the principal, interest and fees owed after foreclosure.

Their comment on the HOPE NOW Alliance and its efforts to reach out to borrowers: "Fitch has seen little evidence to date that these alternatives have helped mitigate foreclosure rates." Perhaps after being repeatedly accused of painting rosy scenarios to support its ratings, Fitch now is erring on the side of being too pessimistic. Let's hope so.

HT to Kevin B.

Full post as published by CL&P Blog on March 28, 2008 (boomark / email).