Local foreclosure prevention specialists are unsure how many homeowners will be helped by a new federal program that gives those who have fallen behind on mortgage payments a 30-day reprieve.
“It’s a new tool but how much of a dent it’s going to make, we don’t know,” said Bill Minkle, interim executive director of Jamaica Plain-based Ecumenical Social Action Committee (ESAC).
Federal officials last week unveiled Project Lifeline, an initiative that will help homeowners who are 90 days or more behind on mortgage payments suspend the foreclosure process for 30 days. Homeowners would be able to use that time to work out more affordable loan terms.
Bank of America, Countrywide Financial, J. P. Morgan Chase & Co., Citigroup, Washington Mutual and Wells Fargo have agreed to participate. The companies will send letters to delinquent borrowers notifying them that they may qualify for help. The homeowners will have 10 days to respond. Borrowers with prime and subprime loans are eligible for assistance.
Some local counselors worry that the companies won’t be able to process what they expect will be a large volume of requests for help. And they say more mortgage servicers need to be involved beyond the six that have agreed to participate.
The six companies that have agreed to participate are members of HOPE NOW, a coalition of counselors, mortgage companies and trade groups. The group announced late last year that it had agreed to freeze interest rates for borrowers with adjustable-rate mortgages. It sent nearly 500,000 letters in November and December to borrowers at risk of foreclosure
Earlier this month, the group reported it had helped about 545,000 subprime borrowers and reached workouts with an additional 324,000 prime borrowers in the last two quarters of 2007.
“[Project Lifeline is] going to make a difference,” said Bob Credle, director of community programs for Urban Edge, a Boston nonprofit group that offers foreclosure prevention counseling.
But Credle noted that the lenders who are participating typically been “accommodating” and more willing to negotiate with counselors who are working with struggling homeowners.
“What would be most helpful is to be able to talk to some of these servicers who don’t do [loan] workouts,” Credle said.
All six mortgage servicers that are participating in Project Lifeline were among the companies that initiated the most foreclosure proceedings in Massachusetts in 2007, according to statistics from The Warren Group, parent company of Banker & Tradesman. Those companies may not have provided the original loan to the borrowers, but instead may have been the loan servicers or bank investors that purchased the loans.
‘In Denial’
ESAC’s Minkle said counselors are concerned that the six companies will be flooded with calls from homeowners and that their staff won’t be able to handle all the requests within 30 days.
“These are six big lenders and there are questions about whether or not their loss-mitigation staff would be able to do it in 30 days,” Minkle said.
Credle said when programs such as Project Lifeline are announced, a lot of homeowners think they are eligible for help and immediately start calling their lenders.
“It becomes 10 times more difficult [to get loan workouts] because everybody is going to be calling these companies,” Credle said.
Minkle said most of the borrowers seeking help at ESAC are more than a month behind in payments and many have subprime loans and owe more than the property is worth.
“They don’t have any hope of refinancing into something more affordable because the loans weren’t manageable from the beginning,” he said.
Gercide Luc, a foreclosure prevention specialist at Urban Edge, said most homeowners need additional time. Urban Edge helps homeowners come up with a personal budget stating income and expenses that they can present to lenders showing them what the borrower can afford. The group has helped negotiate loan workout plans for 46 homeowners in the last year, according to Credle.
Luc said when she contacts lenders, it can take up to two weeks for them to acknowledge even receiving a loan workout package.
She added that some homeowners don’t even open up their mail, so even if they receive a notice from one of those lenders, they may never reach out to get help.
Some homeowners, she said, seek help when it’s too late. “They’re in denial,” she said.
Kevin Cuff, executive director of the Massachusetts Mortgage Bankers Association, said there have been numerous federal and state initiatives to help homeowners but it’s unclear whether they’re working. In Massachusetts, for example, the state Division of Banks last spring called for a 60-day moratorium on foreclosures.
“We have had initiative, after initiative, after initiative that have come across our desk,” Cuff said.
Cuff noted that some programs haven’t been able to help borrowers because of their stringent criteria. Banker & Tradesman reported in January that a MassHousing rescue program designed to refinance subprime loans has only helped two borrowers.
“We’re hearing some reporting that this stuff has been successful but to the best of my knowledge, for a variety of reasons, homeowners are not being as successful at getting access to these bailout programs,” he said.
