Ray Of Hope On Foreclosures

The Record ( — Thursday, March 5, 2009


As the Obama administration unveiled details of a plan to help as many as 9 million borrowers from losing their homes Wednesday, advocates for homeowners and bankers in New Jersey were hopeful the proposal would prevent foreclosures in a state where 62,000 homeowners were affected last year.

The plan, outlined by the president two weeks ago, offers incentives to lenders and loan-servicers to reduce mortgage payments or refinance loans for some borrowers, who may be struggling to make payments amid job losses and wage cuts. Many homeowners whose homes have lost too much value in some of the country's worst housing markets may not qualify, however.

"It is imperative that we continue to move with speed to help make housing more affordable and help arrest the damaging spiral in our housing markets, just |as we work to stabilize our financial system, create jobs and help businesses thrive," Treasury Secretary Timothy Geithner said in a statement. "Economic recovery requires action on all three fronts."

The program, called "Making Home Affordable,'' comes with a list of eligibility requirements and restrictions. For example, eligible loans must have been originated on or before Jan. 1, and borrowers may only have modified mortgages once.

At-risk homeowners who qualify could see mortgage rates fall to as low as 2 percent for five years and the amortization of mortgages extended to a maximum of 40 years. Under the program, the federal government would help foot the bill for reduced monthly payments.

The administration said borrowers will have to provide their most recent tax return and two pay stubs, as well as an "affidavit of financial hardship" to qualify for the $75 billion loan modification program, which runs through 2012.

'Good step forward'

John McWeeney, New Jersey Bankers Association co-president, called the plan a "good step forward."

If the program is successful, he said, banks and homeowners would both benefit, as lenders prefer avoiding the costly and lengthy foreclosure process.

While McWeeney said lenders had been willing to work with homeowners looking to modify their mortgages, he said the program's incentives to lenders and loan-servicers could spur more modifications.

"That may help break the logjam to some extent," he said.

It's unclear to what degree the program could help homeowners who have taken out second mortgages, McWeeney said. And, said Jim Silkensen, the association's co-president, the program apparently wouldn't help borrowers who are already deep into foreclosure.

Phyllis Salowe-Kaye, executive director of the New Jersey Citizen Action group in Newark called the federal government's plan its "biggest and boldest" effort to stem foreclosures so far.

One drawback of the plan is it doesn't force lenders to modify loans — that it is essentially voluntary, said Salowe-Kaye, whose organization works with homeowners and lenders.

"A lot of power of decision-making here still remains with the lender or servicer of the loan," she said.

Stability the goal

Sylvine Marabotto, executive director of the Cedar Knolls-based Consumer Credit Counseling Service of New Jersey, which works with lenders and homeowners in trouble, also praised the initiative. She noted how foreclosures can sink other homes' values.

"It's trying to stabilize neighborhoods," she said.

"You don't want to have five houses on your block that are in foreclosure."

The program's new details apparently pleased investors. All 14 members of the Standard and Poor's Supercomposite Homebuilding Index rose Wednesday, gaining 3.6 percent.

For the year, the gauge is down 25 percent, according to data from Bloomberg News. Shares of Red Bank-based Hovnanian Enterprises Inc., New Jersey's largest homebuilder, increased 4.2 percent.

This article contains material from The Associated Press.

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