Borrowers

Financially strapped homeowners struggling to obtain mortgage modifications are taking their frustrations to court, accusing banks and loan servicers of misleading them or breaking promises to help them hold on to their homes. The lawsuits go to what U.S. Housing and Urban Development Secretary Shaun Donovan has described as the heart of the government's anti-foreclosure efforts: ensuring that banks work in good faith from the start to help borrowers. Although the foreclosure process is less complicated in California than in states where home seizures must be approved by judges, the litigation shows that borrower-servicer relationships can be contentious in the Golden State as well.

Agreeing to settle 29 class-action lawsuits alleging predatory lending, the Ameriquest group of subprime lenders has pledged $22 million to repay aggrieved borrowers and their lawyers -- a fraction of its payments in previous suits before it shut down as the mortgage meltdown set in. The agreement potentially affects 712,000 borrowers from what once was the nation's largest subprime lender, based in Orange County. Many of the loans were from Argent Mortgage Co., an arm that funded borrowers through mortgage brokers.

The decline of housing markets in California and Florida has led to record numbers of foreclosures and is causing even good borrowers to pay more for loans, according to analysis and statistics released Friday. To add to the bleak picture, the government Friday reported the eighth straight month of declining employment, increasing pressure on borrowers burdened by tumbling home prices and loans with rising interest rates. The U.S. jobless rate jumped in August to a nearly five-year high of 6.1%, with nonfarm payrolls down 84,000.

For countless Americans struggling to make their mortgage payments, the problems have just begun. Although a loan modification or foreclosure might allow them to put their housing problems behind them, millions will be dogged for years by the aftermath — a credit score so tarnished by the housing debacle that lenders will avoid them. And if they are able to obtain loans, high interest rates are likely to strain their budgets. This is one remnant of the housing crisis that is sometimes ignored by economists, but the effects may well be a drag on the nation's consumption — and the economy as a whole — for a decade or more.

About 25% of borrowers helped under the administration's massive foreclosure prevention plan have already fallen behind on their new mortgage payments, according to government data that raise new questions about the program's effectiveness. The delinquency figures reflect the latest troubles of the program, known as Making Home Affordable. Treasury Department officials this week announced a campaign to put new pressure on lenders to do more to move struggling homeowners into loans with easier terms.

Fannie Mae, the giant mortgage finance company that helps shape lending guidelines, plans next month to raise minimum credit score requirements and limit the amount of overall debt that borrowers can carry relative to their incomes. The changes are the latest in a series of crackdowns by the mortgage industry and could surprise some prospective home buyers. The industry is tightening loose lending standards that led to the mortgage meltdown and the subsequent economic crisis.

"Wonder" is the watchword in "The Secret World of Arrietty. " Set in an enchanting locale where the potential for magic is everywhere, this impeccable animated film puts its complete trust in the spirit of make-believe. Beautiful, gentle and pure — but not without elements of genuine menace — it will make believers out of adults and children alike. Based on Mary Norton's celebrated 1952 novel "The Borrowers," "The Secret World of Arrietty" has been on the mind of Japan's Hayao Miyazaki, the great animator of the modern age, for more than 40 years.

The NAACP said it had dropped a lawsuit that accused Wells Fargo & Co. of unfairly steering African American borrowers into costly subprime mortgages while providing loans with lower fees and interest rates to white borrowers in similar financial circumstances. The civil rights group said it withdrew the suit after the bank agreed to work with it to develop programs to improve access to the best loans possible in minority neighborhoods and to ensure that borrowers don't get mortgages destined for failure.

In a rare victory for proponents of principal reduction, Fannie Mae and Freddie Mac said they will immediately allow their borrowers to participate in Keep Your Home California and other states' Hardest Hit Fund programs that shrink the mortgages of troubled borrowers using taxpayer funds. California officials made a significant change to the program last year, dropping a requirement that banks match taxpayer funds when homeowners receive mortgage reductions through the program. That means Fannie and Freddie will not have to incur further losses on their loans.

As many as 9,000 struggling homeowners in California could see their mortgages slashed under changes to a program aimed at people who owe more on their loans than their homes are worth. By dropping a requirement that banks match taxpayer funds, state officials are hoping to make it easier for homeowners to reduce their mortgages through the Keep Your Home California program. Rolled out last year, the initiative uses federal funds reserved for the 2008 Wall Street bailout to aid borrowers at risk of foreclosure.