WASHINGTON — Mortgage companies, facing criticism that they aren’t doing enough to stem the housing crisis, are pledging to let troubled borrowers know whether they’re approved for help within 45 days of receiving a homeowner’s application.
The promise is expected to be announced today 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 country. These groups are pushing for a new $300 billion program to allow the government to 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, D.C., who 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 forgive part of the principle balance.
Foreclosure filings last month were up nearly 50 percent compared with a year earlier. Nationwide, 261,255 homes received at least one foreclosure-related filing in May, up 48 percent from 176,137 in the same month last year and up 7 percent from April, foreclosure listing service RealtyTrac Inc. said Friday.
Members of Hope Now include Bank of America Corp., Citigroup Inc., Washington Mutual Inc. and Wells Fargo & Co.