The Working Group’s third report concluded: “While some progress has been made in preventing foreclosures, the empirical evidence is profoundly disappointing.”

“Servicers appear to have reached the ‘low-hanging fruit’ of subprime loans facing interest rate resets, while not developing effective approaches to address the bulk of subprime loans which are in default before interest rate resets,” the report said. “Based on the rising number of delinquent prime loans and projected numbers of payment option ARM loans facing reset over the next two years, we fear that continued reactive approaches will lead to another wave of unnecessary and preventable foreclosures.”

The report says “the number of loans on track for a loan modification has declined precipitously” in recent months. “The mortgage industry’s failure to develop systematic approaches to prevent foreclosures has only spurred declines in property values and further increased expected losses on mortgage loan portfolios,” according to the state officials’ new report.

“We are troubled that more homeowners are not receiving enough meaningful assistance to avoid unnecessary and preventable foreclosures,” said Iowa Attorney General, Tom Miller, a founder and leader of the State Foreclosure Prevention Working Group. “While banks and Wall Street firms continue to report record write-downs of mortgage loan portfolios and securities, the losses do not appear to be flowing down to homeowners in the form of sustainable loan modifications.”

“The financial turmoil we see today is in part a result of a pennywise, pound-foolish approach of the mortgage industry to preventing foreclosures,” said North Carolina Deputy Commissioner of Banks, Mark Pearce. “Instead of developing efficient approaches to reduce the payment burdens of large numbers of unaffordable loans, mortgage servicers have relied on the same approach used before the foreclosure crisis. The result has been record levels of unnecessary foreclosures that have accelerated declines in property values that have affected all of us.”

“While we focus this week on the historic legislative changes underway to address the liquidity crisis impacting the entire financial market, we can not lose sight of the continued crisis facing homeowners across the country at risk of losing their homes," said Richard H. Neiman, Superintendent of Banks for New York. "We will never succeed in righting the economy and stabilizing the markets, unless all institutions, regardless of charter type, work together to implement sustainable solutions to avoid unnecessary foreclosures."

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