Mortgages

Troubled by delinquent mortgages at First Federal Bank of California, regulators have prompted the L.A. savings and loan to quit lending and ordered it to submit a detailed plan for how it intended to remain well-capitalized for the next three years. The cease-and-desist order, which parent company FirstFed Financial Corp. disclosed late Monday, also requires the Westside firm to stop making interest payments on $150 million in publicly held debt.

After Jose Hernandez's family fell behind on payments for the family home in Pacoima, he was approached by a man outside their church who said that for $300 he could help them modify their loan and avoid foreclosure. Hernandez paid the man -- but got nothing in return.

The federal HOPE for Homeowners lending program, created last year to assist 400,000 struggling borrowers, has refinanced only 25 loans so far as the costs and restrictions deter participation, according to the U.S. Department of Housing and Urban Development. "The program restrictions have proven to be more and more difficult over time, as economic conditions worsen," HOPE for Homeowners Executive Director Meg Burns said at a House Financial Services Committee hearing in Washington on Tuesday.

The Federal Reserve is trying to push mortgage rates down. But the marketplace has other ideas. Home loan rates rose this week to the highest level since mid-December, according to mortgage giant Freddie Mac's latest national lender survey. The average rate on 30-year loans was 5.25%, up from 5.10% last week and the highest since 5.47% the week of Dec. 7. "I don't think this is going as planned," said Tom Atteberry, a money manager at First Pacific Advisors in Los Angeles.

The investors who are buying failed IndyMac Bank want to exploit its experience in dealing with a mountain of troubled mortgages by having the thrift sell loan-modification services to other financial firms. The Pasadena mortgage lender, which collapsed under the weight of bad loans in July, has been run since then under the name IndyMac Federal Bank by the Federal Deposit Insurance Corp.

Banks can offer loan modifications or other programs if you're behind -- or will soon be -- on a mortgage. Often the changes involve easing up on the interest rate, at least temporarily, or changing the payment schedule to give you more breathing room. But banks generally will offer these programs only if you have good prospects for paying off the loan eventually. The bank to which you write your mortgage check isn't always calling the shots in these matters.

Citigroup Inc. on Tuesday promised to cut monthly mortgage payments temporarily to $500 for some homeowners who have been fired or laid off -- a test program bank officials say could become a model for other banks if it proves successful. The borrowers otherwise would face foreclosure because their lack of income makes it impossible to restructure their loans with more affordable payments.

House Democrats, under pressure from a group of moderates in their ranks and the banking lobby, agreed Tuesday to narrow legislation that would give bankruptcy judges the power to force lenders to rewrite mortgages for debt-strapped homeowners. The compromise was expected to come to a vote in the House as early as Thursday.

Franklin Raines, the former chief executive of Fannie Mae, used a special program at mortgage lender Countrywide Financial to receive a below-market rate on a home loan, contrary to sworn testimony he made to Congress in December, according to the top Republican on the House Committee on Oversight and Government. Raines' lawyer, however, disputed Rep. Darrell Issa's characterization of events.

In an attempt to ease the foreclosure crisis, the House on Thursday approved a major change to bankruptcy law that would give judges new powers to modify home mortgages. The revision, which was approved 234 to 191 as part of a broader housing bill, would allow bankruptcy judges to reduce, or "cram down," the principal owed on an existing mortgage for a primary residence.