WASHINGTON - Mortgage companies, facing criticism that they aren’t doing enough to stem the housing crisis, are pledging to let troubled borrowers know if they’re approved for help within 45 days of getting a homeowner’s application.
The promise is expected to be announced Tuesday by the Hope Now alliance, a Bush administration-backed industry group, as part of a new set of guidelines for mortgage companies participating in the effort. The Associated Press obtained a copy of the guidelines.
The agreement is designed to clarify the mortgage assistance process for borrowers and the industry alike, but is not legally binding.
It also tries to alleviate a major stumbling block: the reluctance of companies that hold second mortgages, such as home equity loans, to agree to such modifications. Such requests should be approved, the agreement says, unless the holder of the second mortgage would be put in a worse financial position.
Consumer groups, however, say Hope Now’s efforts will never match the growth in foreclosures around the nation, and are pushing for a new $300 billion program to let the government back new loans for struggling homeowners.
“There isn’t a serious level of modification going on because the program is voluntary,” said John Taylor, president of the National Community Reinvestment Coalition, a consumer group in Washington. He described the newest announcement as “baby steps.”
Housing counselors have complained that the process of loan modifications is bureaucratic and difficult to understand, and say it is tough for consumers to get someone on the phone with the authority to help.
The industry has also favored repayment plans, which aim to help borrowers get back on track after missing a few payments, rather than lower interest rates or forgiving part of the principal balance.
Consumer advocates have pressed Congress to let bankruptcy judges rewrite the terms of mortgages for strapped borrowers, but that proposal faces intense opposition from the Bush administration and Republican lawmakers and is unlikely to make it through Congress this year.
Foreclosure filings last month were up nearly 50 percent compared with a year earlier.
ASSOCIATED PRESS