Mortgage Daily

Published On: July 23, 2007
Foreclosure Prevention Alliances Grow

Foreclosure programs initiated

July 23, 2007


photo of Coco Salazar
Politicians, political organizations and private companies are teaming up to help borrowers who will potentially face foreclosure.

To guide struggling borrowers, the U.S. Department of Housing and Urban Development recently issued a list with top-10 tips to avoid foreclosure and related scams.

“We want to encourage homeowners to take action and use every resource available so that they can get control of their finances and stay in their home,” said HUD Secretary Alphonso Jackson in a written statement.

Troubled borrowers were advised to not ignore they have a problem when they cannot make the mortgage payment; contact the lender as soon as the problem arises; open and respond to all mail from the lender; know their mortgage rights by reviewing loan documents and foreclosure laws and time frames in their state; understand foreclosure prevention options; contact a non-profit housing counselor; prioritize spending; and use their available assets. HUD also warned about for-profit foreclosure prevention companies that may charge hefty fees for services that are free through the lender or a HUD-approved housing counselor and about firms that claim to immediately stop a foreclosure if the borrower signs a document giving them right to act on their behalf.

American Business Advantage and Community Loan Service Center have partnered to launch a national foreclosure prevention program. American offers refinance options and foreclosure mitigation specialists, and has a professional, certified, foreclosure counseling program. While the company’s primary focus is to develop and assist borrowers “who will, unfortunately, be faced with the terrible experience of managing their own foreclosure,” its secondary focus is to educate the public about the mortgage and foreclosure industry, according to an announcement.

“There are an overwhelming number of individuals who are not prepared to interface with their lenders,” said R. Elliott Bradley, president and chief executive of American, in the announcement. “Adjustable rate mortgages, predatory lending, and an over-valued real estate market have all fueled the foreclosure epidemic.”

Meanwhile, the Federal Deposit Insurance Corp. and the NeighborWorks Center for Foreclosure Solutions have teamed up to promote foreclosure-prevention strategies for subprime and nontraditional loan borrowers at risk of losing their home. The efforts will be focused in nine markets : the Greater Boston area of Massachusetts; Wilmington, Dela.; Baltimore, Md.; South Texas; Chicago, Ill.; the Louisiana and Mississippi Gulf Coast; Alabama’s Black Belt; Kansas City; and Los Angeles.

“More and more consumers with subprime and so-called ‘hybrid’ mortgage products are facing the very real prospect of losing their homes through foreclosure as their payments begin to rise and become unaffordable,” said FDIC Chairman Sheila C. Bair in the announcement. “We need to find workable solutions to keep these good-faith borrowers in their homes, which is the goal of the partnership.”

The organizations aim to build capacity at the local level to reach out to at-risk borrowers, identify successful foreclosure intervention strategies and deliver homeownership education counseling. Across the nine markets, a foreclosure solution and prevention working committee will be established in each coalition of the FDIC’s Alliance for Economic Inclusion, which consist banks and thrifts, community leaders, public officials and others seeking to improve access to banking products and services for underserved populations.

The Senate Appropriations Committee approved for funds of $100 million to be provided to the U.S. Department of Housing and Urban Development for foreclosure prevention counseling, according to a news release issued by the office of Democratic Sen. Bob Casey. The federal funds will be used by non-profit counseling agencies that work one-on-one with borrowers in unaffordable subprime loans. Because the individual nature of such counseling often costs between $1,000 to $3,000 per person and subprime foreclosures have been rising, existing programs have become overwhelmed by requests for assistance. While the funds should help stem the tide, the bill must now pass the Senate and the House to then be signed by the president.

“The current situation in the subprime mortgage market is untenable,” Sen. Charles E. Schumer D-N.Y., said in the written statement. “The more we do to help solve it, the fewer families will be faced with losing their homes because of bad loans and dubious mortgage brokers.”

Democratic Sen. Sherrod Brown of Ohio, who along with Schumer and requested the funds, noted these will be essential as “tens of thousands of predatory loans hit their reset dates in the coming months,” but that “there is much more work to be done” to curb the effect of subprime loans.

The Association of Community Organizations for Reform Now recently announced that, at its Presidential Candidates Forum, Senator Hillary Clinton said she would propose subprime lending legislation that requires face-to-face mortgage counseling for risky home loans if she were president. The focus of the ACORN-hosted forum was on living wages, the foreclosure crisis, immigration and education.

“Sometimes when borrowers get that counseling, they decide they couldn’t afford that home or loan,” Clinton was quoted as saying in the announcement. “We need to educate people and support and help them make good decisions. We need to change laws, change attitudes and have solidarity in getting it done.”

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