Real Estate

Feds expand help to those in danger of losing a home

Rose Inman packs living room items in the home she is about to lose, Monday, May 11, 2009, in Seattle. Inman has been laid-off twice and can no longer afford her $3,100 monthly mortgage payments and hasn't had any luck getting her mortgage bill lowered.  (Elaine Thompson / The Associated Press)
Rose Inman packs living room items in the home she is about to lose, Monday, May 11, 2009, in Seattle. Inman has been laid-off twice and can no longer afford her $3,100 monthly mortgage payments and hasn't had any luck getting her mortgage bill lowered. (Elaine Thompson / The Associated Press)

For the past two months, Rose Inman hoped she could benefit from President Barack Obama's plan to help homeowners avoid foreclosure.

Now it's too late.

Aurora Loan Services is set to foreclose today on her home overlooking Seattle's Puget Sound. Despite numerous calls, e-mails and letters, she says she's been able to have only one phone conversation with a company representative.

"It's like this huge, concrete thick wall that you cannot get through," said Inman, 58, who is working as a human resources consultant but making much less than she was before she was laid off by the city of Seattle.

On Thursday, the Obama administration said its bold mortgage assistance program launched in March is helping thousands of borrowers, though some lenders are working faster than others. Participating mortgage companies have made more than 55,000 offers to modify borrowers' loans, but officials could not say how many of those homeowners had in fact been helped.

Knowing that many troubled homeowners can't be helped, the Obama administration expanded its $50 billion mortgage aid program, announcing new measures that would help homeowners avoid a foreclosure if they don't qualify for other assistance.

The initiatives are intended to streamline the process of selling a home that is worth less than the mortgage, or transfer ownership of a home to the lender. Both options will still ding the homeowner's credit score, but less than a foreclosure.

Fourteen companies — including Aurora Loan Serv- ices, Wells Fargo and JPMorgan Chase — have signed up and will be paid for each loan they modify. To further entice mortgage companies to participate, the government is offering payments totaling up to $10 billion to compensate them for the risk of falling home prices.

"The basic problem is that the program is very complicated and involved to set up," said Guy Cecala, publisher of trade publication Inside Mortgage Finance. He said he doesn't expect to see large volumes of loan modifications before July or August.

Program slow to start

Although some mortgage companies have added staff and made preparations for the program, others apparently are lagging behind.

Many housing counselors across the country complain that the program has been slow getting off the ground.

"Our experience at the ground level has been, so far, frustrating," said Michael van Zalingen, director of homeownership at Neighborhood Housing Services of Chicago, a counseling group.

Entry-level employees at mortgage companies, he said, either are steering borrowers away from the plan or are unaware of it.

Housing counselors say many borrowers, such as Inman, who should qualify, are still losing their homes.

"We offer a wide range of foreclosure prevention options to our customers," Deborah Munies, an Aurora spokeswoman, said in an e-mail, while declining to comment on Inman's case. "In cases where the customer has the ability and willingness to make a reasonable monthly payment, we make every effort to avoid foreclosure. Foreclosure is pursued only when a variety of other workout options have not been successful."

Government officials estimate up to 4 million borrowers will get their loans modified under the Obama plan, but housing experts like Mark Zandi of Moody's Economy.com expect the number will be less than half of that.

There have been, of course, lucky homeowners such as Daniel Iturriaga, 45, a warehouse worker from Compton. Working with a counselor from Springboard, a nonprofit counseling group, Iturriaga was able to get JPMorgan Chase and Fannie Mae to modify his home loan.

He's going from a monthly payment of about $2,300 to about $1,275. After a three-month trial, it should be final in mid-June.

"It's a long process, but I still have a little hope to stay in my home" said Iturriaga, who bought his home for about $400,000 in 2005 and has seen houses on the same block sell for half as much.

The initiatives announced Thursday are aimed at ineligible homeowners: borrowers who are unemployed or owe significantly more than their homes are worth.

Generally, there are two options for them to avoid foreclosure: The homeowner can sign the property title over to the lender in what is known as a deed in lieu of foreclosure. Or, with the lender's permission, the homeowner can sell the property for less than the value of the loan, a "short sale."

Mortgage companies would get up to $1,000 and borrowers would get up to $1,500 in relocation costs.

The lending industry must make sure it sets up the program correctly, said Faith Schwartz, executive director of Hope Now, a mortgage industry group formed in response to the foreclosure crisis. "This is a very well-thought-out plan," she said. "People have to be a little bit patient."

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