Recent Congressional legislation has pushed lenders into situations that they may now find more costly than they would like. In October, 2007 Hope Now, a voluntary alliance of lenders, loan service-rs, loan counselors and government housing agencies was established in order to help stem the tide of rising foreclosures nationwide. Many of the largest lenders are listed on the Hope Now website where visitors are encouraged to “reach out to your servicer in order to start the communication process”. The alliance mission statement, “To maximize the preservation of Home-ownership while minimizing foreclosures”  is noble and compelling. The problem is lenders are lenders and typically want more.

Subsequent reports indicate that Hope Now had provided 503000 loan workouts in the first quarter of 2008. An impressive statistic when you include the 500000 sub prime workouts and 324000 to prime borrowers reported in the second half of 2007. In actuality (real world)  lenders and service-rs were so slow to respond to troubled homeowners that the government felt the need to step in again. Now addressing borrowers more than 90 days late and at the highest level of risk of foreclosure, Project Lifeline was introduced in Feb. 2008 as an added Hope Now program.

More recently (June 17th 2008) the Hope Now alliance announced a brand new agreement by members designed to “greatly expedite the process of preventing foreclosures” These new guidelines are scheduled to be fully implemented within the next 60 days and they include time-lines for responses to borrowers requests as well as addressing short sales and second mortgages.

The need to create these guidelines may be the clearest indication that response time has not been what it needs to be and that communication with the troubled borrower is slow. Keep in mind these are voluntary measures and lenders will do what lenders do regardless of any alliance or agreement with competitors.  Make no mistake Hope Now is a voluntary agreement amongst competitiors, not without government pressure and possibly a bit of arm twisting.
  

In the wake of Hope Now, FHA revisions were put into place raising loan limits on FHA insured loans in higher cost areas to $729,750 from $362,790 allowing qualified buyers to obtain FHA insured financing at the lowest published rate regardless of credit or loan amount. This higher loan limit is due to expire at the end of 2008 but may very well survive longer. A good piece of legislation on the surface. Except that many lenders are charging premiums on the new jumbo FHA loans above the FHA published rate. Some have added as much as a point to the rate and others have tacked on fees that make the loan expensive. Still others have implemented a minimum credit score requirement of their own basically shutting out people who otherwise would qualify for FHA financing.  An April 2008 Wall Street Journal article published more on the lenders and their fees.

While lenders pull one way and government pulls another is it any wonder that chaos and confusion seems to infect big banks REO and Mitigation Departments. That level of uncertainty hinders the ability to respond in any timely manner.  It may be this simple. If you agree that certain guidelines are indeed workable and you commit to them the rest is just communication, isn’t it ?  Most bank employees have no idea what the institution they work for has committed to and so just wait for direction.

A voluntary initiative should be accountable. Maybe a scorecard illustrating each lender and the progress they’ve made according to the guidelines they’ve agreed to for all the world to see and share would make these new Hope Now time-lines as streamlined as they promise. 

For more info on FHA Insured loans, investor loans and FNMA loan guidelines please contact me at 561-306-6736 or email   george@ges-realty.com