Mortgage Industry Group Says Loan Workouts Grow to 1 million; Critics say Efforts Fall Short

By ALAN ZIBEL | AP Business Writer

WASHINGTON (AP) - A banking industry group says lenders have helped more than 1 million troubled borrowers from last July through January, though critics say the response to the mortgage mess falls short.

Statistics released Monday by Hope Now, a Bush administration-organized effort to help at-risk borrowers, show more homeowners are getting assistance. But critics on Monday said the industry had not released enough information about what kind of help people are getting and questioned the value of the banks' intervention.

Of the 1 million borrowers that received loan workouts, 73 percent were helped through repayment plans, which help borrowers get back on track after missing a few payments. The remaining 27 percent were helped through permanent loan modifications, such as lower interest rates.

The statistics go back through July and include loan modifications made before the Hope Now alliance was set up in October in response to soaring mortgage defaults and home foreclosures.

Consumer advocates say repayment plans are not effective assistance for most and that loan delinquencies and foreclosure rates continue to soar.

John Taylor, chief executive of the National Community Reinvestment Coalition, noted that many borrowers aren't able to keep up - even with modified loans.

"If the end goal is to assist working Americans to avoid foreclosure, then the numbers reported should provide detail on the nature of those loan adjustments," Taylor said in a statement. "Failure to provide real information raises real questions about the success of voluntary efforts."

Sen. Christopher Dodd, the chairman of the Senate Banking Committee, also said the industry and Treasury Department have not made enough progress in dealing with the housing crisis. He supports a broader, government-funded effort to buy up troubled loans, while the Bush administration has preferred to voluntary industry-led efforts.

The Hope Now group "does not have the resources or capacity to deal with the sheer size of the problem that has millions of Americans in financial dire straits," Dodd, D-Conn., said in a statement.

The industry group' statistics show that workouts made up about 36 percent of total loan modifications in January, up from about 30 percent in the fourth quarter of 2007.

Sheila Bair, chairman of the Federal Deposit Insurance Corp., said in a statement that she was encouraged by that trend, but "concerned about the reliance on repayment plans which may be unsustainable for borrowers and lead to later delinquencies."

Bair on Monday sent a letter to banks encouraging them to report details of their foreclosure-prevention activities to the Hope Now alliance. The federal Office of Thrift Supervision, the Federal Reserve and other regulators have issued similar requests to the industry.

Steve Bartlett, chief executive of the Washington-based Financial Services Roundtable, the industry group coordinating the Hope Now effort, said in a conference call with reporters that lenders "have stepped up in what is the most massive and impressive industry effort that I can recall."

Members of Hope Now include Bank of America Corp., Citigroup Inc., Washington Mutual Inc. and Wells Fargo & Co.

So far, the effort has reached about 638,000 subprime borrowers with poor credit, or about 9 percent of the 7.1 million subprime loans that were outstanding as of last fall. In December, it had reached 8 percent of those borrowers. Among subprime borrowers, about 70 percent of borrowers received repayment plans, while 30 percent received loan modifications.

The group also said that among subprime loans in January, there were more than 45,000 workouts and more than 48,000 repayment plans, noting that workout volume is closing in on being equal to repayment volume.

Paulson said Monday he is pleased with Hope Now and "encouraged that the number of borrowers receiving help is rising faster than the number entering foreclosure," according to remarks prepared for a conference in Arlington, Va.

In December, the Bush administration negotiated a five-year freeze in loan rates for some troubled borrowers, and last month, the administration announced that some homeowners threatened with foreclosure get a 30-day reprieve.

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