Mortgage aid plan is praised

Nov 12, 2008 (Omaha World-Herald - McClatchy-Tribune Information Services via COMTEX) -- FNM | Quote | Chart | News | PowerRating -- A national plan outlining ways lenders can more swiftly renegotiate delinquent home loans should help stem local foreclosures, said two Omahans who assist struggling homeowners.

Federal officials on Tuesday announced a simpler and quicker procedure for modifying loans held by mortgage giants Fannie Mae and Freddie Mac. The officials expressed hope that it would be adopted by the entire industry.

The plan is to begin by Dec. 15.

"I'm very grateful that they are moving this quickly, because the other stuff that has been available has not reached the majority of borrowers," Julie Kalkowski said.

Kalkowski is managing director of the nonprofit Financial Stability Partnership, an initiative sponsored by United Way of the Midlands and the University of Nebraska at Omaha. She also is co-founder of Go! Hope, the Greater Omaha Home Ownership Preservation Effort.

In recent weeks, major mortgage lenders such as Citigroup, JPMorgan Chase and Bank of America have announced their own plans to address delinquencies. Hope Now, an alliance of mortgage companies, was organized last year by the Bush administration.

But the federal plan announced Tuesday is the most sweeping effort yet to help troubled homeowners.

"I think the thing that is different about this (from previous efforts) is it's a consensus and it's coming down from higher up -- it's actually coming down from housing officials," said Don Leu, president and chief executive of Consumer Credit Counseling Service of Nebraska.

Leu said the program will help inject stability into the system and give consumers a plan they can understand. For example, he said, individual lenders handle attempts to work out delinquent loans differently, so agencies such as his don't know what to expect and find inconsistent results.

In some cases, the outcome depends on the person at a lending company who answers the phone, Leu said. He cited a recent example in which someone at a lender's service department provided a payment plan that was impossible for the homeowner to meet. A follow-up call to a different person in a different department yielded a "wonderful" plan that worked for the homeowner, he said.

The federal plan aims to reduce the paperwork and other documentation required to rework mortgage loans, said James B. Lockhart, director of the Federal Housing Finance Agency, which runs Fannie Mae and Freddie Mac since the government took them over in September. To encourage mortgage services to participate, they will receive $800 for each loan that is modified.

The plan targets people who have missed three or more mortgage payments, live in the home and have not filed for bankruptcy protection.

The goal is to make the payments more affordable -- defined as no more than 38 percent of a household's monthly gross income -- by reducing the interest rate, deferring payments on part of the principal and extending the term of the loan to as long as 40 years.

Struggling homeowners who don't meet the guidelines would be eligible for a special review, although anyone who intentionally defaults on a loan in order to get it modified would be disqualified, officials said.

Fannie and Freddie own or guarantee about half of U.S. home loans.

More than 4 million American homeowners, or 9 percent of borrowers with a mortgage, were either behind on their payments or in foreclosure at the end of June, according to the most recent data from the Mortgage Bankers Association.

Leu said it is difficult to know how many people locally the work-out plans could affect. "Nobody knows for sure -- they are hard numbers to get," he said.

Available numbers indicate that Nebraska and Iowa continue to have some of the lowest foreclosure filing numbers nationally.

According to mortgage research company RealtyTrac, Nebraska ranked 50th in the nation in September in the number of foreclosure filings, with 38. That was a 91 percent drop from the same month a year ago. Iowa ranked 42nd with 386 foreclosure filings in September, a nearly 50 percent drop from the same month a year ago.

Nationally, foreclosure filings -- default notices, auction sale notices and bank repossessions -- were reported on 265,968 properties in September, a 12 percent decrease from the previous month but still a 21 percent increase from September 2007, according to RealtyTrac.

"Much of the 12 percent decrease in September can be attributed to changes in state laws that have at least temporarily slowed the pace at which lenders are moving forward with foreclosures," James J. Saccacio, chief executive officer of RealtyTrac, said in a press release.

Despite the slower pace, the nation continues to struggle with the worst housing recession in decades.

Kalkowski of the Stability Partnership and Go! Hope said she was relieved that federal officials decided to make the plan effective in December rather than waiting until the new administration is in place in January or later.

"It's better to be pro-active," she said.

Leu agreed.

"I'm happy with the timing of it," he said. "I wished they would have done it even earlier. But when you're working with such a large problem, you have to take it one step at a time."

However, Federal Deposit Insurance Corp. Chairman Sheila Bair said the new plan " falls short of what is needed."

Bair has said the government needs to do more to help tens of thousands of home borrowers avert foreclosure.

This report includes material from the Associated Press and the Los Angeles Times.

--Contact the writer: 444-1183, christine.laue@owh.com

To see more of the Omaha World-Herald, or to subscribe to the newspaper, go to http://www.omaha.com. Copyright (c) 2008, Omaha World-Herald, Neb. Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

More News:   Market Updates | Stock Alerts | All Trading News | Stock Index