More than two dozen loan servicers that collect payments on most U.S. mortgages have agreed to adopt guidelines that are intended to expedite the process of working with troubled borrowers to prevent foreclosures.

The new HOPE NOW guidelines state that loan servicers should inform homeowners within 45 days whether their application for a workout — such as a repayment plan, loan modification or short sale — has been accepted or denied.

Servicers also agreed to re-subordinate second-lien loans if their position will not be worsened by a refinance or workout — potentially removing a major obstacle to preventing foreclosures in cases where borrowers have "piggyback" second loans. HOPE NOW servicers will also attempt to contact homeowners with subprime adjustable-rate mortgages (ARM) and other homeowners with ARMs that have a probable risk of default 120 days in advance of reset.

The Bush administration helped organize the HOPE NOW coalition of loan servicers, and has cited its efforts in opposing a proposal to expand FHA loan guarantee programs to help more troubled borrowers refinance (see story).

State banking regulators have questioned the effectiveness of the lending industry’s loss mitigation efforts, saying only one in four troubled borrowers were being diverted from the foreclosure process at the beginning of the year. A recent report by the Office of the Comptroller of the Currency raised questions about the number of borrowers helped by HOPE NOW loan servicers, and called for more consistent reporting of workout efforts (see story).

"I supported the HOPE NOW program when it came out and I continue to think it is worth trying, but it is now clear that much more aggressive action is needed and reinforces the need for legislation to expand the FHA program to help refinance at-risk borrowers into viable mortgages," Rep. Barney Frank, D-Mass., said in a statement after the release of the OCC report. Frank supports a $300 billion expansion of FHA loan guarantee programs to refinance mortgages for owner-occupied home when lenders agree to write-down principal and pay fees, limiting their recovery to 85 percent of a property’s currently assessed value.

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription
×