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Homeowners who have been facing foreclosure the last few months are getting relief, according to the Hope Now Coalition. The Bush administration says their mortgage rescue efforts have helped lenders save almost 1.2 million homeowners. However, some groups are calling the Hope Now Coalition data into question, claiming that they are not doing enough to help people save their homes.
How Hope Now Coalition Analyzes Data
Hope Now breaks down its information into two groups: repayment plans and loan modifications. While a repayment plan allows the borrower more time to make up the missed payments, a loan modification changes the lending terms, such as reducing the principal or interest rate, to adapt to the homeowner’s financial situation. Loan modifications also include temporary interest rate freezes and mortgage extensions.
Out of the 1,178,000 homes the Hope Now Coalition has worked with, 848,000 were repayment plans. These are usually less favored as a mortgage rescue option because borrowers could not afford the original monthly payment, making it difficult for them to pay later. On the other hand, loan modifications, which are generally more effective, have increased in the past year from 25 percent of all loan workouts to 37 percent.
Criticism Of Hope Now And Federal Aid
Outside groups have criticized the Hope Now Coalition for inaccurately representing how many homeowners they are assisting with loans. For example, interest rate freezes and extensions on mortgage payments are viewed as quick fixes with limited relief that do not benefit the borrower in the long term.
According to a study by the Mortgage Bankers Association, 40 percent of subprime borrowers who went into foreclosure had already gone through a workout with lenders. National Community Reinvestment Coalition COO Jim Carr warned that easy fixes would only make it more likely for borrowers to walk away from mortgages later when they have no equity to lose. Carr added, “[Repayment plans] put more loans upside-down…it’s so important that, rather just putting out stats to look good, that something is actually accomplished.”
Other Aspects Of Federal Aid And Hope Now Coalition Data
Additionally, the data that Hope Now has provided does not represent the total number of loan worked out from July 2007 through the end of February 2008. During those months, around 419,000 borrowers lost their homes in foreclosures. Since then, Carr pointed out that the coalition’s foreclosure rates continue to increase. Jared Bernstein from the Economic Policy Institute also said, “The issue with Hope Now has always been, ‘Will it help enough people?’ It’s a conservative program consistent with the administration’s desire to not bail out undeserving lenders or borrowers.”
Congress is working to develop plans that would boost the number of loan modifications, such as allowing the Federal Housing Administration (FHA) to let borrowers who have fallen behind on payments refinance with FHA-insured loans. Another plan is to make lenders take some of the fall if a home’s value has fallen below the mortgage balance. These measures could potentially help nearly half a million homeowners this year, demonstrating how Hope Now and the government are still working towards mortgage rescue solutions.
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