Alliance Takes Steps To Curb New Foreclosures

Posted on November 20th, 2007 by saman

The Hope Now alliance, which is a partnership between non-profit housing counselors and mortgage companies backed by the White House, was created specifically to ward off a rising wave of mortgage foreclosures. Next week, 300,000 letters from the Hope Alliance will be posted to homeowners who may be having difficulty meeting their monthly mortgage payments. The letters will urge homeowners to find out the options available to them to prevent defaulting on their mortgages.

The letters provide homeowners with a toll-free number (1-888-995-HOPE) where homeowners can readily obtain information about options such as repayment plans, modification of their mortgage terms and other alternatives that they may be elegible to take advantage of. Treasury Secretary Robert Steel commented that this first round of letters will be followed by additional outreach efforts in the months ahead. He added that foreclosure serves no one’s interest.

Congressional Democrats have criticized the current administration for moving at a snail’s pace to put a halt to the current foreclosure crisis. Financial industry experts and government agencies have predicted that 2-million additional subprime mortgages will go onto foreclosure between now and the end of 2008. When that occurs, homeowners with weak credit histories will be faced with the resetting of their adjustable rate mortgages and skyrocketing monthly payments.

The Chairman of the House Financial Services Committee, Barney Frank, D-Mass., and others, have urged the administration to quickly endorse a proposal made by the head of the Federal Deposit Insurance Company (FDIC) which would have lenders consider making widespread conversions of ARMs to fixed-rate loans provided that the borrowers are current on their monthly payments.

At the same time some are working toward solutions, problems continue to worsen. Today, Ohio officials announced that crime in neighborhoods is rising as the foreclosures do. One neighborhood, Slavic Village, is said to have more than 800 homes now vacant and serving as homes to looters and squatters. These homes have also sustained considerable damage from intruders. Foreclosure Prevention Program Director Mark Wiserman said today that in the inner city of Cleveland, it only takes about 72 hours for looters to enter a home after the homeowners have left. People also dump garbage on the property to avoid paying for haulage to a dump.

The Governor of the Federal Reserve Board recently said that conditions for subprime borrowers are going to get worse before they get better and that the majority of the resets for adjustable rate mortgages are still to come. He added that on an average, nearly 450,000 subprime mortgages are scheduled to reset in each quarter of 2008. This will raise the borrower’s monthly payments by about $350.00, or 25%.

At the same time, declining home prices and the limit on the increase of home equity will prevent these homeowners from being able to refinance into less costly loans and an increasing number will end up with a mortgage balance greater than the value of their home. As a result of all this, commercial property values have also begun to decline.