New Agreement Could Mean More Help for Homeowners

By MICHAEL R. CRITTENDEN

June 16, 2008 2:59 p.m.

WASHINGTON -- Top mortgage lenders and servicers,
under pressure to do more to help prevent record numbers of
foreclosures, have reached a major agreement on new guidelines to
improve and speed up the industry's voluntary efforts to help
struggling homeowners.

The agreement among the firms in the Treasury
Department-backed Hope Now alliance, which is scheduled to be announced
Tuesday, comes as U.S. Senate lawmakers prepare to begin debate this
week on a massive housing package aimed at slowing the record pace of
foreclosures that continues to roil the economy. That legislation,
which includes a program to refinance up to $300 billion in troubled
mortgages, could be voted on by the Senate this week, sources said.

The Hope Now agreement pledges to have lenders and
servicers take a uniform approach when dealing with homeowners,
including setting a specific timeline for them to respond to borrowers
seeking to avoid foreclosure.

DAILY ECONOMICS NEWSLETTER

Sign up for our new
email of the day's Real Time Economics posts, by Greg Ip, Sudeep Reddy
and the Journal's economics team. The email also includes the latest
economic headlines, data and columns. Choose HTML or plain text.

• Econ Blog: Builders as Gloomy as Ever

• More Real Estate coverage: Columns, listings

"Borrowers seeking help should receive an
acknowledgment of their request within five business days once received
by the lender, the agreement says, and would in most cases receive a
final decision on whether they will receive help with their loan within
45 days. Lenders would also promise to stay in touch with borrowers
while reviewing a particular loan -- calling, emailing or sending a
letter about the status of their help request"

Lenders and servicers have also agreed to other steps,
including the automatic subordination of second liens in certain
circumstances. The question of how to deal with second lien holders has
slowed efforts to modify loans and work with borrowers, but the
servicers' agreement suggests that a second lien holder should
re-subordinate their loans to allow refinancing or a loan modification
under certain conditions.

The agreement expands other options available to
lenders to help borrowers avoid foreclosure. In addition to
forbearance, repayment plans and loan modifications -- including a
writedown on a loan's principle -- the agreement directs lenders to
accept a deed in lieu of foreclosure or a short sale instead of
completing the foreclosure process.

The short-sale language is new, and pledges Hope Now
members to accommodate a homeowner's effort to sell their house at the
current fair market value, even if that value is less than the borrower
owes on their mortgage.

More generally, the agreement calls on servicers to
delay foreclosure proceedings that are about to begin, or have already
begun, when there is a possibility that other steps could allow a
homeowner to remain in their residence.

People familiar with the agreement, which all Hope Now
members had to sign off on, said the intent is to bring clarity and
transparency to the alliance's efforts, giving homeowners a better
understanding when they seek help with their loans. Though not legally
binding, all Hope Now participants are expected to implement the new
uniform standards within 60 days.

Hope Now claims its efforts have resulted in nearly
1.6 million loan workouts since July 2007, though those numbers have
been met with skepticism from policymakers and regulators who have
repeatedly called for more aggressive voluntary efforts by the mortgage
industry.

A report released last week by the Office of the
Comptroller of the Currency, which oversees national banks, suggested a
lower figure for loan workouts. The study, which was based on six
months of data from 23 million mortgages held or serviced by nine
national banks, found that there had been close to 167,000 loan
modifications or payment plans through March of this year.

Meanwhile, foreclosures around the country continue to
show few signs of abating. Foreclosure tracking firm RealtyTrac Inc.
said Friday that one in every 483 U.S. households received a
foreclosure filing in May, the highest monthly foreclosure rate since
the firm first started issuing its report in January 2005.

Write to Michael R. Crittenden at michael.crittenden@dowjones.com

One might want to take a closer look at the hi-lighted paragraph before getting all warm and fuzzy. It's still seems to me that the BANK is ultimately in control of whether you get any help and the decision is solely theirs to make. . . I'll pass on that foo.