Hope Now Lenders Still Choosing Payment Plans Rather Than More Permanent Fixes

Posted by: Chris Palmeri on September 30, 2009

Hope Now, the consortium of banks, mortgage companies and credit counselors hoping to stem the housing crisis, released its August numbers. New foreclosure starts dropped by more than 25% to 224,000. The number of people who actually lost their homes in foreclosure sales was down 16% to 75,000.

Hope Now says the numbers show its program to workout loans is working. ”Our data suggests a correlation between the drop in foreclosures and the increase in work-out solutions to help at-risk borrowers,” said Faith Schwartz, the group’s executive director.

Look deeper into the numbers though. Repayment plans that merely give the borrower an opportunity to catch up on past due payments vastly outnumber loan modifications, where borrowers actually see their interest rates or principal reduced.

Loan modifications are viewed as a more permanent fix because they reduce the monthly payments. Presently repayment plans outnumber loan mods at Hope Now lenders by nearly three-to-one. And the gap is widening. In July the ratio of payment plans to load mods was closer to two-to-one.

If the economy comes back, many of the 3.2 million borrowers with payment plans may get caught up again. If not, they’ll just fall behind again. Hope Now, pay later.

Reader Comments

oh really

October 1, 2009 9:36 AM

"Look deeper into the numbers though. Repayment plans that merely give the borrower an opportunity to catch up on past due payments vastly outnumber loan modifications, where borrowers actually see their interest rates or principal reduced."

thank you for pointing this out

jo

October 1, 2009 10:15 AM

Big surprise...more of the "financial shuffle", that all of Wall Street and the entire banking system have been doing for the last year. Let's all hokey poky around resolving the real issue, so we can keep paying dividends on the worthless pieces of paper known as MBS's.

It's a joke, the people who fell behind will make the smaller payments, get "caught up", their payments will go back to being non-affordable and viola' we're right back in the same place 6 mos. from now.

Does not take an economist to see where this is going. When are they going to wise up and just take the hits needed to rectify the situation??? Oh that's right...NEVER.

TomF

October 1, 2009 11:27 AM

I am a bankruptcy attorney and I see people who have been a part of the so called modification programs first hand. The Banks are stringing people along pretending that they will modify a mortgage and then starting the foreclosure 4 to 6 months later. I have yet to see 1 legitimate modification. The Obama administration is getting duped, if they think Bank of America or Wells Fargo have reformed their practices.

Welcome to 2010

October 1, 2009 12:20 PM

Hope Now is hoping to not loose any future income hedged against large numbers of defaults continuing to happen. Some people refuse to accept evidence against their beliefs.

Expect more of the same in 2010.

Ed

October 1, 2009 2:54 PM

How completely broken does this country need to become before the insatiable greed that has devoured it comes to an end? I guess, from the looks of everything I read in all of the news sources I turn to, and from what I see from our business and government leaders, so completely broken that those who have been the rapacious recipients of usurious payments and over-compensated executives who have trashed families and communities discover there is nothing left in America... and leave us looking at 3rd world countries with a longing for their quality of like. God help us... no one else seems willing.

tony

October 2, 2009 8:40 PM

bank of american does not want to do any loan modification, just wait until the 5 year loan reset this coming year
the Obama adiministration has no idea waht is going on with the banks.

Von Smith

October 3, 2009 9:16 AM

How would it be if the homeowners could remain in their homes at a cost within their budget? What if the mortgage owners could still receive a return on their investments? What if the costs and stigma of foreclosure and its aftermath could be reduced? What if the costs to the taxpayer could be reduced or eliminated?

Consider this: A new agreement between the homeowner and the mortgage holder: a “Mortgage Conversion Contract.” The homeowner gives up ownership of the home in exchange for relief from the mortgage and an affordable lease of 2-3 years with an option to buy the home after that.

• The homeowner remains in the home, without the problems of bankruptcy and with the possibility of becoming a homeowner again.
• The mortgage holder becomes a landlord with rental income and time for the market value to recover, once the current crisis passes.
• The Federal government could subsidize creation and implementation of a model “Mortgage Conversion Contract” to speed the process and assure fairness.
• If the homeowners qualify, they could receive rent subsidies under existing government housing programs.

This concept could ease the stress and costs on millions of American homeowners and the holders of their mortgages. How does that sound to you?

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Sean Monaghan

March 12, 2010 8:37 PM

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Well, if you need to increase the speed of your investment sell or add more value for your renters we have the right solar systems at the right price. Solar since 1978.

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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