We reach these preliminary conclusions based on somewhat limited data. Some major national banks that service subprime loans have declined to provide the State Working Group with data based on advice or direction from the Office of the Comptroller of the Currency. Another federally-chartered thrift refused to provide data based on its participation in the industry-led HOPE NOW data collection effort. We call on the OCC to urge national banks to report data to the State Working Group, so that we will be able to provide a complete picture of the subprime servicing market.

In addition, we renew our calls for systematic, long-term solutions to efficiently deal with subprime loans originated in recent years. While there is an industry-led effort to identify a set of loans for “fast track” modifications, we believe this effort only scratches the surface of the need for a more efficient and systematic approach. A continued insistence that each delinquent loan needs intensive one-on-one attention will hamstring efforts to prevent large numbers of foreclosures. As a result, millions of homeowners will lose their homes unnecessarily, impacting not only those families, but their neighbors and communities as well. We must do better.

Section I: The State Foreclosure Prevention Working Group and the Need for Public Data to Measure Servicer Performance in Preventing Unnecessary Foreclosures

The State Foreclosure Prevention Working Group (“State Working Group”)¹ formed in the summer of 2007 after representatives of 37 state attorney general offices and several state banking regulators met to discuss the growing foreclosure crisis. States have long been active in addressing abusive lending practices, either through legislation² or enforcement.³  But unlike traditional law enforcement efforts, the States face the challenge of addressing the devastating impact of elevated foreclosure levels on our citizens and state and local economies.

Foreclosures impact much more than the homeowner and lender involved. While devastating for the individual homeowners and their families, foreclosures also have a negative impact on the property values of their neighbors. The Center for Responsible Lending estimates neighborhood property values will decline $202 billion due to subprime foreclosures, or approximately $5,000 for each homeowner living near a foreclosed property.⁴ Similarly, the Woodstock Institute found that each foreclosure within a city block of a single-family home reduces that home’s property value by approximately 1%.⁵

While home lending is financed globally, the impact of foreclosures is inherently local. According to the U.S. Conference of Mayors, the foreclosure crisis will result in a loss of $166 billion in gross domestic product of metropolitan areas.⁶ Foreclosures are also associated with an increase in crime and lead to vacant and abandoned properties. City, county, and state

governments must deal with these issues and bear significant costs from foreclosures.

  1 The State Working Group consists of representatives of the Attorneys General of 11 states ( Arizona, California, Colorado, Iowa, Illinois, Massachusetts, Michigan, New York, North Carolina, Ohio, and Texas), two state bank regulators (New York and North Carolina), and the Conference of State Bank Supervisors.

2 North Carolina passed the first state predatory lending law in 1999. Since that time, the majority of states have enacted similar laws to supplement the Home Ownership and Equity Protection Act (HOEPA), the 1994 federal predatory lending law, and some states have recently enacted new laws to address abuses in the subprime mortgage market.

3 State enforcement actions against mortgage lenders have resulted in the return of almost $1 billion to state citizens.

4 Subprime Spillover, Center for Responsible Lending, revised January 18, 2008, available at: http://www.responsiblelending.org/pdfs/subprime-spillover.pdf.

5 The External Costs of Foreclosure: The Impact of Single-Family Mortgage Foreclosures on Property Values, Dan Immergluck and Geoff Smith, available at:

http://www.fanniemaefoundation.org/programs/hpd/pdf/hpd_1701_immergluck.pdf.

6 The Mortgage Crisis, U.S. Conference of Mayors, November 2007, available at: http://usmayors.org/metroeconomies/1107/report.pdf.

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