Mortgage Help for Struggling Homeowners

May 25 2008 - Lenders are increasingly willing to change their loan terms for struggling borrowers, mortgage industry executives say, but the increased flexibility has not been enough to help many homeowners who wait too long before seeking help.

According to a recent report by the Hope Now initiative, a mortgage industry outreach group formed last year to help struggling homeowners, nearly 503,000 owners worked with lenders and loan servicers affiliated with the initiative in the first three months of this year to modify their loan payments and avoid foreclosure.

That figure represents a significant increase over the final three months of 2007, but Faith Schwartz, Hope Now’s executive director, said, “There is still more work to be done.”

Industry analysts and mortgage counselors agree. “Hope Now is having a material impact, but it is being overwhelmed by the magnitude of the problem,” said Mark Zandi, chief economist of Moody’s Economy.com. “Moreover, the problem has shifted away from ARM resets, which it was designed to address,” alluding to changes in adjustable-rate mortgages, “and toward negative homeowners’ equity and rising unemployment.”

Mr. Zandi said that this year and next, about 3.9 million homeowners would fall behind on their mortgages. He projected that about 2.5 million would lose their homes.

Calls continue to flood the Hope hot line at 1-888-995-HOPE (1-888-995-4673), which is the toll-free hot line affiliated with Hope Now. It is operated by the Homeownership Preservation Foundation, a Minneapolis-based nonprofit counseling service.

Colleen Hernandez, the foundation’s executive director, said her service had fielded about 250,000 calls in the first three months of this year (other people called their lenders directly). About 30 percent of the callers sought counseling, and about a third of those, or 25,000 people, were actually eligible for help.

After counseling and outreach to the lender or mortgage servicer, about 34 percent had their loans modified, while another 30 percent remain in negotiations.

Of the 250,000, then, roughly 8,500 were able to get their loans modified and another 7,500 remain in negotiations for modifications. Many of the remaining 9,000 who were eligible for help, Ms. Hernandez said, improved their finances through counseling and caught up on payments.

In New York, New Jersey and Connecticut, the number of cases that lenders have modified loans for struggling borrowers has more than tripled in the past year, according to Hope Now.

Absolute numbers, however, remain modest. Only about 3,300 mortgages were modified by servicers in the first three months of this year in New York State, for example; 2,100 in New Jersey; and about 1,200 in Connecticut.

Connie Lassandro, housing director for Nassau County, said borrowers were still waiting far too long to seek help. “It’s so frustrating because we’ve saturated the community with messages about where to go for help,” Ms. Lassandro said.

Of the roughly 200 weekly calls that her department fields from troubled borrowers, Ms. Lassandro said, about 20 percent are current enough on their mortgages to avoid foreclosure. That is actually an improvement from six months ago, she said, when the figure was about 5 percent.

“We’ve been quite successful lately in doing loan modifications,” Ms. Lassandro said. “Lenders aren’t breaking down the doors to do them, but they realize they have to be cooperative or they’ll end up with a lot of real estate on their hands.”

Mortgages: Help for Struggling Homeowners
by BOB TEDESCHI | New York Times