Eleven loan servicers that handle an estimated 60 percent of U.S. mortgages have agreed to participate in a Bush administration initiative to expand outreach to borrowers who may face foreclosure.
The administration is billing the HOPE NOW partnership as a plan to coordinate the efforts of mortgage counselors, servicers, lenders, investors, and state and local government to reach as many homeowners as possible to prevent foreclosures.
Announcing the partnership today at a Washington, D.C., press conference, Treasury Secretary Henry Paulson applauded the companies who have signed up so far, but said greater participation is needed “to get to all those that need help as quickly as possible.”
Others have good reason to join the alliance, Paulson said in a statement, “because minimizing foreclosures benefits lenders and investors as well as homeowners.”
The Bush administration in August announced that it would allow the Federal Housing Administration to guarantee to refinance loans for borrowers who are already in default.
Democrats have urged President Bush to appoint a “mortgage czar” to coordinate the government’s response to the housing downturn, provide more money for housing counselors, and give mortgage repurchasers Fannie Mae and Freddie Mac more leeway to purchase loans.
HOPE NOW will conduct a national direct-mail campaign to reach at-risk borrowers, encouraging them to either call their lenders or a credit counselor. Members have agreed to adopt a standard process to speed work flow, productivity and communications between servicers and counselors.
Another goal is to expand the counseling capacity and make it easier for borrowers and counselors to communicate with loan servicers.
Paulson said that the participation of the American Securitization Forum — which represents investors in mortgage-backed securities as well as servicers — in the HOPE NOW initiative is evidence that “investors also have an interest in expanding the reach of mortgage counselors to prevent foreclosures whenever possible.”
Some consumer groups, regulators and lawmakers have said loan servicers have been too slow to engage in workouts and loan modifications with troubled borrowers — in some cases because of restrictions in loan pool servicing agreements with investors.
Last week, FDIC Chairwoman Sheila Bair urged servicers to engage in wholesale conversions of adjustable-rate mortgages into fixed-rate loans where possible when borrowers are in danger of default.
“Frankly, I’m frustrated that the servicing restructuring has not reached the level that I had hoped it would,” Bair told investors at a conference in New York. Citing a report by Moody’s Investor Services that workouts were being conducted on less than 1 percent of troubled subprime loans, Bair warned, “We have a huge problem on our hands. We can’t just sit here doing this kind of case-by-case, laborious restructuring process with all these millions of subprime hybrid ARMs.”
The American Securitization Forum today released a statement saying it supports directing some of the cash flows from mortgage-backed securities (MBS) to counseling services for borrowers, in situations where loan servicers conclude that counseling is likely to mitigate losses.
The forum released new policies in June aimed at facilitating loan modifications “in appropriate circumstances” by establishing a common industry framework, but the group maintains that modifications should be considered on a case-by-case basis.
According to the Financial Services Roundtable, lenders participating in HOPE NOW include Bank of America, Citigroup Inc., Countrywide Financial Corp., Fannie Mae, Freddie Mac, First Horizon National Corp., GMAC ResCap, HSBC North America Holdings Inc., JPMorgan Chase & Co, National City, Option One Mortgage, SunTrust Mortgage Inc., Washington Mutual Inc., and Wells Fargo & Co.
Industry and consumer groups signed on to HOPE NOW include the American Financial Services Association, Consumer Bankers Association, Consumer Mortgage Coalition, Homeownership Preservation Foundation, Housing Partnership Network, The Housing Policy Council, and the Securities Industry and Financial Markets Association.