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Lenders To Accelerate Help Plan

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Bloomberg News

Published: June 18, 2008

Bank of America Corp., Countrywide Financial Corp. and other leading U.S. lenders adopted rules aimed at speeding the pace of mortgage modifications amid criticism that they haven't done enough to stem foreclosures.

The Hope Now Alliance, a group of lenders, loan-servicing companies and counselors, for the first time agreed on a uniform timetable for helping delinquent borrowers keep their homes, the group said today in a statement in Washington. The plan also includes the first guidelines for handling second mortgages.

"The goal here is obvious: We are trying to reach more at-risk homeowners earlier and begin the process of preventing foreclosures," Faith Schwartz, Hope Now's executive director, said today in a conference call with reporters.
Federal Deposit Insurance Corp. Chairman Sheila Bair and House Financial Services Committee Chairman Barney Frank are among lawmakers and regulators pressing lenders to help more owners keep their homes. Foreclosure filings rose 48 percent in May from a year ago as dropping home prices trapped borrowers in mortgages they couldn't afford, RealtyTrac Inc. said June 13.

Hope Now, formed last year at the urging of U.S. Treasury Secretary Henry Paulson, reported May 30 that member companies helped avert foreclosure for 183,000 homeowners in April, pushing the total since July to 1.6 million.

The agreement among alliance members will let servicers help at least 20 percent more homeowners, Steve Bartlett, president of the Financial Services Roundtable, a Washington-based industry group, said in today's call with reporters.

In the guidelines, the companies agreed to acknowledge borrowers' request for help within five days of receiving their application and to notify them of whether they were approved or denied for assistance within 45 days, Schwartz said.

They also pledged to send letters to homeowners 60 days or more late on their payments to let them know about their options to seek counseling or get help from loan servicers, according to the agreement.

The agreement calls for second-lien mortgage holders to maintain their junior position to first-lien holders in the event the mortgage fails. It let the first-lien holder modify the loan without fear of losing their priority status in recouping losses.

"The Hope Now procedures announced today will allow even more homeowners to get help faster," Robert Steel, Treasury undersecretary for domestic finance, said in a statement. "We are pleased to see the alliance members continually making improvements and expect them to maintain their efforts."

John Taylor, president of the Washington-based National Community Reinvestment Coalition, said the agreement failed to go far enough, and urged regulators and lawmakers to force the industry to lower interest rates on home loans and write off portions of balances.

"It's another baby step in the right direction, but it doesn't match up to the magnitude of the problem," Taylor said in a telephone interview. "It's time for the regulatory agencies and Congress to bring in the stick."

Citigroup Inc., JPMorgan Chase & Co., and Wells Fargo & Co., are among the 27 mortgage-servicing companies that signed onto the agreement.

The U.S. Senate may begin debating anti-foreclosure legislation as early as today to create a Federal Housing Administration program that would insure up to $300 billion in refinanced mortgages for borrowers at risk of foreclosure after loan holders agree to forgive part of the loan amount.

The Bush administration vowed to veto the measure before the House approved it last month.

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