Stephanie Armour
USA Today
A mortgage industry alliance plans to announce Tuesday that it’s reached agreement with lenders and loan servicers to develop a standardized process for helping homeowners at risk of foreclosure.
The move by the Hope Now alliance involves uniform guidelines that lenders and servicers have agreed to abide by, such as issuing a decision within 45 days on whether to modify a homeowner’s loan. The plan follows complaints that the Hope Now alliance, which was set up to aid troubled homeowners, has been slow to help enough people.
Organizers offered no projections on how many people might be helped. But the major thrust of the program is to create a more streamlined approach to speed the process of providing help. The roughly 25 lenders and servicers that work with Hope Now have agreed to the guidelines, which aren’t legally binding. Some servicers may adopt the guidelines quickly, but all are expected to do so within 60 days.
Still, some economists say even streamlined guidelines may not make much of a dent.
“Hope Now has been helpful, but it’s getting completely overwhelmed by the magnitude of the problem,” says Mark Zandi, chief economist of Moody’s Economy.com. “Anything they can do to help more homeowners is great, but they’re not set up and designed to solve the problem that is now plaguing the mortgage market, which is negative equity.”
Among the agreements:
•Prompt contact with borrowers. Lenders and servicers will correspond within 45 days with borrowers who seek assistance. This will provide homeowners with deadlines and status notices that let them know when action is likely to be taken.
•Foreclosure-avoidance steps. The agreement will set up options that mortgage holders agree to use, including loan modifications, repayment plans and temporary suspension of payments. Also, if a borrower falls 90 days or more past due on payments, the servicer would agree to delay foreclosure proceedings if there’s a chance other options could help avoid repossession.
•Short sales and second mortgages. Both issues have been tricky in negotiations with lenders. But the agreement would mean that secondary loan holders would be more apt to allow modifications or refinancing plans. For homeowners facing hardship, the servicers would agree to suspend foreclosure for a period to allow for the possibility of a short sale, which involves selling a property for less than the market value.
“It’s really important to have more clarity and transparency for what foreclosure prevention can look like,” says Faith Schwartz, executive director of the Hope Now alliance. “It’s a big step forward for the industry. When you make something more uniform and set expectations … you’re going to help more people.”
Critics have complained that the help amounts to a Band-Aid in many cases. Austin King, national director of Acorn, the Association of Community Organizations for Reform Now, says Hope Now has a chance to make good on this new agreement, since previous steps have produced little improvement.
“What they are announcing would be a huge step forward, if these pieces come together,” King says. “The question is, what kind of work-outs are the distressed borrowers going to be getting?”
The Homeownership Preservation Foundation runs the hotline for the Hope Now alliance, which is 888-995-HOPE (888-995-4673).
