NEW YORK (Reuters) - About 370,000 strapped U.S. borrowers averted foreclosure last year as a large number of homeowners responded to a government-backed effort by the mortgage industry to stem surging delinquencies.
By Al Yoon
NEW YORK (Reuters) - About 370,000 strapped U.S. borrowers averted foreclosure last year as a large number of homeowners responded to a government-backed effort by the mortgage industry to stem surging delinquencies.
The Hope Now alliance of mortgage counselors, lenders and servicing companies said on Friday the industry's letter-writing campaign led 16 percent of borrowers contacted to call their loan servicer. It said that was more than five times the typical response rate.
"The number of borrowers being helped is accelerating rapidly," Faith Schwartz, executive director of Hope Now, said in a statement. Results from 233,000 letters sent in November are greater than expected, another Hope Now spokesman said.
!ADVERTISEMENT!The alliance, formed under guidance of the U.S. Treasury and the Department of Housing and Urban Development, said servicers eased terms on 120,000 loans and negotiated new repayment plans for another 250,000 homeowners. Mortgage servicers tripled the rate at which they modified subprime loans last quarter from the third quarter, it said.
Hope Now's study does not include results from a plan announced by President George W. Bush last month to "fast track" loan modification efforts, a Hope Now spokeswoman said. The industry-written plan would freeze interest rates for some subprime borrowers facing default due to scheduled increases in their monthly payments.
Hope Now "is showing the potential to help more homeowners keep their homes and working to prevent a market failure," U.S. Treasury Secretary Henry Paulson said in a statement. He said he was looking forward to reports in coming months as mortgage servicers implement the rate-freeze plan, he said.
Payments on $370 billion in adjustable-rate subprime loans are slated to rise this year, according to Lehman Brothers.
Hope Now's study follows data from the Mortgage Bankers Association, which said on Thursday its members helped 237,000 homeowners in the third quarter. However, foreclosures were initiated against 384,000 borrowers, it said.
Foreclosures reached a record in the third quarter as loose underwriting standards of the housing boom and falling house prices collided, MBA data showed. Faced with a sour housing market and possible economic recession, mortgage companies, lawmakers and regulators are scrambling to help borrowers stay in their homes.
Recession fears and expectations of interest rate cuts by the Federal Reserve reduced long-term mortgage rates to 5.75 percent this week, their lowest since July 2005, according to Bankrate. However, lower rates and modifications may not alone solve the foreclosure problem because many borrowers have no economic stake in their properties, Tom Marano, global head of mortgage- and asset-backed securities at Bear Stearns & Co.
"The good news is that with rates trending down the imminent default problem is becoming less of an issue," Marano said at a conference on Thursday. "The real issue is the equity issue. People are walking away because they have no equity in their homes, so we are going to have to try things other than just modifying people's rates."
In subprime lending, which sparked the current credit crisis, Hope Now said it helped 10.4 percent of the borrowers on an annualized basis. The data came from nine servicers handling about 58 percent of subprime loans.
(Editing by Tom Hals)
