Increased Calls for Stronger Foreclosure Solutions

Posted on March 13th, 2008 by Samanta Parks

The Hope Now Alliance was launched by the White House and has recently stated that they have helped more than a million borrowers in danger of losing their homes. However, some critics of the program say that it is unclear if this program will work down the road.

With the number of foreclosures steadily growing, consumer advocates, community groups and congress members are calling for a broader governmental and industry response. Some critics of the program say that it is “a lot of hope” and not a lot of results. These critics believe that the impact of the program is greatly exaggerated. They say that the reality is foreclosure rates are still on the rise.

This past Thursday, a report showed new evidence of the poor financial outlook. This report showed that delinquent mortgages grew to the largest number in twenty-three years during the last few months of 2007. Borrowers with thirty day delinquencies fell into default. This is the first stage of the foreclosure process.

Foreclosures of homes rose to a new high in the last part of 2007.

Declining home prices added to the pressure on borrowers. Many of these borrowers have the value of their houses drop below the amount that they owe. A financial website has estimated that about eight million homeowners will end up having zero equity in their homes by the end of this month.

The rate of foreclosures will most likely remain high as the loans which were issued during 2005 and 2006 will continue to be reset to higher payments. Many borrowers will be unable to afford these higher payments. Many of these loans were secured with an assurance to the borrower that they would be able to refinance their homes before the higher, or “reset” payment began. However with the prices of homes dropping, many borrowers end up owing more than their home is really worth and this effectively eliminated the option of refinancing. If the economy grows worse and more people find themselves unemployed this may increase the number of families that could end up homeless.

The Hope Now Alliance boasts that over a million homeowners have been assisted by loan modification and repayment plans. However critics say that these quoted statistics do not tell how many homes will be saved from the foreclose process down the road. The Mortgage Bankers Association published a report that stated that forty percent of subprime borrower were able to save their homes. They accomplished this by modifying their loans are arranging a new payment schedule. These individuals had lost their homes previously.

The success of Hope Now came from opening up the lines of communication between lenders and borrowers. A lot of homeowners would have a difficult time contacting someone who had the authority to arrange a modification for their loan. Lenders would have a difficult time with borrowers because those in trouble would ignore their calls and letters that were for the purpose of talking about new terms for their mortgage.

Critics voiced concern about the large number of financial companies that are present on Hope Now’s board. This causes the belief that the program is not helping borrowers but it is helping lenders. Hope now provides lenders with important service by gathering and putting together information about homeowners in trouble.

Hope Now staff members have been experiencing an increasing number of calls and critics believe this is because they are not getting sufficient counseling about their options. Critics believe that the Hope Now Alliance succeeded in involving mortgage and investors in their efforts but failed to garner help from financial counselors.

Many cannot see significant change in the current foreclosure crisis coming in the near future. Many are looking for an endpoint in this current problematic situation.