Mortgage Lenders Help Out Borrowers

Mortgage companies have assisted over a million borrowers strapped for cash to stay in their homes over the past six months. However, foreclosures are on the rise, along with the number of borrowers with good credit facing financial difficulties. As much as lenders have helped consumers, much more needs to be done to relieve homeowners of their real estate burden.

How Mortgage Companies Are Helping Out Borrowers

The Hope Now Alliance, a group dedicated to assisting mortgage rescue efforts, has been doing all it can to save homeowners from foreclosure. Most of the changes involve repayment plans that allow borrowers to catch up on missed payments. Loan modifications made up over a quarter of homeowners helped, usually reducing the interest rate or extending the maturity of the loan.

Prime Borrowers Receiving Some Help From Lenders

Although the situation for subprime mortgages has eased up, borrowers with prime mortgages and good credit are suffering, making up 43 percent of people in need of a reworked loan. Foreclosures for prime borrowers also went up to 41 percent, with over 67,000 foreclosures in January alone. The trend is disturbing, given that prime mortgage borrowers are supposed to be in a better position than subprime holders.

Unlike subprime loans, which receive more loan modifications, repayment plans are much more common for prime mortgages. While it may provide monetary relief in the short-term, with so many foreclosures and homes for sale on the market, prime mortgage borrowers face immense difficulty refinancing or selling their homes. Even worse, an estimated seven out of 10 homeowners are not receiving any help from their mortgage companies, even though they are in serious delinquency.

Mortgage Lender Expectations In The Future

Many economic critics say the industry is not doing enough, since so many homeowners are struggling to make monthly payments. If this financial distress continues, it will force the U.S. government to develop and execute a federal mortgage rescue plan.

Sen. Chris Dodd (D., Conn.) is sponsoring a legislative initiative targeting billions of federal dollars at the housing market. “It is hard to imagine that the same administration whose oversight -- or lack thereof -- led us into the mortgage crisis will be able to devise a plan strong enough to pull us out of it,” said Dodd.

Contrary to Dodd’s proposal, Treasury secretary Henry Paulson opposes a huge government bailout. “Most of the proposal I’ve seen would do more harm than good,” said Paulson, “[it would] bail out investors, lenders or speculators who…should be accountable for the risks they took.”

Housing counselors, such as the Reinvestment Coalition, believe foreclosures are inevitable because most of the assistance lenders are giving, like loan modifications, is a temporary fix. In any case, with so many homeowners in a state of personal economic danger, both mortgage companies and the U.S. government needs to continue offering help.