Efforts expand to help financially distressed homeowners
NATION'S HOUSING
Two mass-market loan modification programs are aimed at preventing foreclosures. But critics say they don't solve the problem and could have a corrosive effect on borrowers.
Reporting from Washington — You may have seen headlines about the latest public and private efforts to help financially distressed homeowners cope with their mortgage payments. But you might not have caught key details that could affect you or people you know -- now or in the recession months ahead.
One of the most ambitious mass-market loan modification programs was outlined Nov. 11 by the Federal Housing Finance Agency -- overseer of Fannie Mae and Freddie Mac -- along with the 33 banks and mortgage servicers that make up the private-sector Hope Now Alliance.
The program, scheduled to start nationwide Dec. 15, is aimed at thousands of subprime mortgage holders and other borrowers who are three months or more behind on their payments and slipping fast toward foreclosure. To be eligible for intervention, homeowners need to document that they can handle mortgage payments of as much as 38% of their monthly gross income.
They also need to demonstrate that they have experienced some form of financial reversal that made them delinquent on their payments and prove that they did not intentionally go into default just to get better terms.
If they can pass through these hoops, borrowers may qualify for reduced interest rates, deferrals of principal payments or extended loan terms -- whatever combination it takes to get them an affordable payment with their current income.
Even though the formal kickoff isn't until next month, participating lenders say they want to hear as soon as possible from potential beneficiaries. If homeowners can't connect directly, they can work through the Hope Now Alliance ( www.hopenow.com) or the U.S. Department of Housing and Urban Development ( www.hud.gov/foreclosure). Hope Now also has a toll-free hotline -- (888) 995-4673 -- staffed by counselors.
The same day that the new federally assisted mass-modification effort was announced, one of the largest lenders and servicers, Citigroup Inc., unveiled a program designed to catch at-risk homeowners before they fall behind.
Citigroup will reach out to an estimated 500,000 mortgage customers who are not delinquent but who appear to be at risk -- either because their credit files show signs of financial stress or because their homes are in markets that Citigroup believes face serious economic strains and job losses in the coming year.
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