HOPE NOW – Help With Foreclosure

Oct 12th, 2007 @ 7:39 AM by Alden Smith

The Bush administration has announced that there has been a new program set up for help with foreclosure assistance.  Eleven loan servicers that handle an estimated 60 percent of U.S. mortgages have agreed to participate in this program.  The focus of this program is to  coordinate the efforts of mortgage counselors, servicers, lenders, investors, and state and local government to help people who are in default and make every attempt to stop foreclosure.

This partnership, announced on October 10th, is ground breaking news.  Treasury Secretary Henry Paulson is very happy with the results, but wants more lenders to sign up for the program to further increase the possibility of stopping even more foreclosures.  Paulson said in a statement that he is hoping others will participate “because minimizing foreclosures benefits lenders and investors as well as homeowners.”

What Has Been Done

The Bush administration announced in August that it would allow the Federal Housing Administration to guarantee to refinance loans for borrowers who are already in default.  Democrats are urging the President to put in place a “mortgage czar” to oversee that the government’s response to housing issues are addressed. They would also like to see mortgage repurchasers Fannie Mae and Freddie Mac more leeway to purchase loans.  There has been talk about raising the bar on jumbo loan caps to help more people make a recovery.

HOPE NOW Goals

The program will use direct mail campaigns to reach those at risk, urging them to contact mortgage counselors or their lenders.  Members of HOPE NOW have agreed to set standard processes in place to help speed the work flow and make sure that this situation is addressed in a timely manner.  They also plan to expand the counseling capacity so that it is easier for counselors and buyers to work with lenders.

One of the biggest complaints from consumers and advocates has been the slowness of the lenders to address workouts.  Restrictions in loan pool servicing agreements with investors are blamed for this situation.  One big issue with workouts is the fact that so many of the mortgages have been packaged and sold as securities, making it very hard for lenders to reach investors.  Permission is often needed to insure that the workout is readily approved by investors, who are scattered around the world.  It is a safe bet that finding these investors and getting permission needed is a monumental task.

FDIC Chairwoman Sheila Bair has advocated for loan servicers to work towards wholesale conversions of adjustable-rate mortgages into fixed-rate loans.  Just this plan alone would ease many of the current woes in the housing market.  ARM’s are the biggest single issue in the current situation, with many loans resetting and putting borrowers in a position that they are unable to meet mortgage payments.  Turning ARM’s into a fixed rate would ease this problem and save many people from foreclosure.

The HOPE NOW initiative is a step in the right direction.  The list of banks and lenders signed up for the program reads like a list of Who’s Who in the banking industry.  Putting this plan in place and following through would be the single most important thing done yet to help ease the crush of foreclosure and default payments.