Hope Now Accelerating Foreclosure Help Programmes

June 18th, 2008 | Tags: Foreclosure

With foreclosures surging across the country, a lot of criticism has been directed against the ineffectiveness of Hope Now. The latter was launched with much fanfare supported by the Bush administration and the mortgage industry. The latter has come to an understanding with loan servicers to unify the process of helping those at risk from foreclosures. For instance – within 45 days the decision will be taken as to whether a loan could be modified or not. It is expected that this will accelerate foreclosure-help programmes. Approximately all the 25 lenders that work with Hope Now have agreed to this. These are of course voluntary and without any legal force. Servicers may accept the new guidelines immediately. Most are expected to fall in line within the next 60 days.

Economists however continue to be skeptical about how much this will make its mark considering the magnitude of the problem. Mar Zandi of Moody’s Economy.com quips that any sort of help is welcome even if it is just a drop in the ocean. What is plaguing the market today is its negative equity.

The guidelines chalked out are as follows. Firstly the lenders and borrowers are to respond within 45 days to all the borrowers that contact them. This will enable borrowers to clearly know the deadline of action. Secondly options will be laid down – loan modification, repayment schedules and temporary suspension of dues. If the borrower has crossed the 90 days limit for overdue payments, there will be a chance given if the lenders feel that with a temporary reprieve the borrower can tide over the temporary difficulty. Thirdly is the option of short sales and second mortgages. Lenders so far have been evasive on both these points. But this time they are expected to be more co-operative in allowing second mortgages or if that is not possible agree to a short sale by which the lender will accept an amount less than the loan dues.

Uniformity will lead to more transparency hopes Faith Schwartz, of Hope Now alliance. For the industry it is a big step forward. Austin King, of ACORN, says that Hope Now has a chance to prove wrong the criticism so far leveled against it by showing positive results. Standardization of help operations should logically help more people than hitherto.

The problem so far had been about spiking interest rates but falling real estate, job losses and general sluggishness of the American economy has compounded that.