The private sector group that is trying to combat mortgage foreclosures will announce a new effort today to try to get help to more people facing the threat of foreclosures, according to a housing industry official.
This official, who spoke on condition of anonymity because he wasn’t authorized to speak publicly before the official announcement today, said that Hope Now, the private sector alliance of mortgage service companies, had developed a new approach that would create a streamlined approach to modifying loans to offer more people the option of reducing their monthly payments.
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The new approach will aim at processing more loans by establishing overall criteria that can be used to speed up the process.
The effort has the support of the Federal Housing Finance Administration, the agency that has taken control of mortgage giants Fannie Mae and Freddie Mac.
The new initiative will be announced on Tuesday by Hope Now and by James Lockhart, director of the Federal Housing Finance Agency, according to the industry official who spoke on condition of anonymity.
Treasury Secretary Henry Paulson has been applying pressure to the mortgage industry to speed up the processing of applications for loan modifications given the record wave of mortgage foreclosures that are occurring at present in the wake of the worst housing slump in decades.
Democrats have criticized the Bush administration for not doing enough to combat the surge in foreclosures and have been lobbying for the administration to adopt a proposal put forward by Shelia Bair, head of the Federal Deposition Insurance Corp., which would have the government guarantee a portion of qualifying loans that have been reworked as an incentive for financial institutions to provide more help.
Under Bair’s proposal, the $700 billion financial rescue bill that was passed by Congress on Oct. 3 would be tapped to provide financial support for the effort.
The loan guarantee program is still being discussed inside the administration and is not expected to be a part of Tuesday’s announcement.
Critics have complained that the mortgage companies are moving too slowly to deal with the tidal wave of foreclosures and that the government needs to do much more to prod a more aggressive response.
The Treasury Department refused to comment on the possibility that the industry and the government regulator for Fannie and Freddie had reached agreement on a new initiative.
Faith Schwartz, executive director of Hope Now, also would not discuss details of Tuesday’s announcement but did say, “Any progress we make is to further the goal to reach more borrowers at risk.”
Late last month, JP Morgan Chase & Co. became the latest major bank to beef up its mortgage modification efforts. JPMorgan said it would expand efforts to help people avoid foreclosures on an estimated $70 billion in loans in a program which could help as many as 400,000 customers.
