Efforts to save homes 'intensified'

Interest rate cuts will be a centerpiece of the sweeping homeowner assistance effort announced this week by the Federal Housing Finance Agency.

The program, set to launch next month, will establish uniform standards for lenders to identify and work with troubled homeowners, federal officials said.

Targeted will be homeowners at least three months behind on mortgages and who owe 90 percent or more than the home is now worth. Investors and borrowers who filed for bankruptcy do not qualify.

Lowering interest rates can make mortgage payments more affordable. Every 2 percent rate cut, for instance, reduces a payment about 30 percent, industry officials said.

This latest foreclosure prevention effort is considered significant because it covers all loans owned or guaranteed by mortgage giants Fannie Mae and Freddie Mac, or about 60 percent of the market. The goal is to set a standard for private investors and other lenders that control the remainder of the market, officials said.

"Efforts have definitely intensified. Every month, every quarter, more resources are put forth toward helping people stay in their homes," said Dustin Hobbs, spokesman for the California Mortgage Bankers Association.

Consumer advocates and mortgage brokers trying to help borrowers hold onto homes have pushed the industry to do more for homeowners struggling with mortgage payments during the housing downturn.

"It does seem there is momentum to keep people in their homes. But how many people have lost their homes in the meantime," said Kevin Stein, associate director for the California Reinvestment Coalition, a San Francisco-based low income housing advocate.

The chief complaints have been that lenders are slow to respond, often waiting until homeowners fall behind on payments. And borrower advocates said lenders remain reluctant to cut deals that make loans affordable for enough homeowners to avert foreclosure.

The latest survey of housing counselors by Stein's organization found assistance for borrowers hasn't improved enough over the past year, he said.

"It's improved modestly," he said. "But loan modifications are not happening as much as they should and they're taking months to happen. The percentage of groups reporting foreclosures as the most common outcome is down a bit. But it's still the most common outcome."

About 45 percent of homeowners seeking modifications through a voluntary industry effort end up in foreclosure, said Faith Schwartz, executive director for Hope Now. That number is too high and should come down, she said.

"There are things we can do to be more effective," Schwartz said.

Industry leaders acknowledge they are trying to catch up as foreclosures continue to grow.

Established a year ago, Hope Now is a coalition representing most of the nation's lenders and loan servicers. It pledges to aggressively work with troubled homeowners, and Schwartz cited growing numbers of success stories as evidence lenders are stepping up efforts.

"Clearly foreclosures are up and the trends of delinquencies are not encouraging. So we're working hard to change that," she said. "We get that this is a pretty big deal and needs significant and extraordinary solutions."

What concerns borrower advocates is the homeowners seeking help are the 20 percent who respond to contacts from lenders or housing counselors, based on Hope Now reporting.

"So these are people presumably motivated to stay in their houses and they're talking with people who understand this stuff," Stein said. "But the one bullet point that continues to be the case is foreclosures are cited by housing counselors as the most common outcome for borrowers."

Lenders have an incentive to help homeowners avoid foreclosure if it's less costly than changing loan terms, Hobbs said.

"That's the math they have to do," Hobbs said. "If they modify the loan, sure they're going to lose money, but with a foreclosure, it's a much bigger loss."