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Is the Hope Now Program More like False Hope Now?

By
Mortgage and Lending with Ascent Home Loans

As we sit and wait what appears to be the Senate putting the FHASecure program on the back burner, we once again have the government, namely the Treasury Secretary traipsing out in front of the news media and declaring his support for"The Alliance" better known as the Hope Now Program. Although "The Alliance" sounds more like a group of superheros, I believe it is far from that. Let's take a look.

Altogether, the alliance is made up of  60 lenders and servicer's, along with a number of counseling firms that will help borrowers caught in the sub-prime mess workout lower interest rates, payments, or spread out the past due payments over the life of the loan. But if you look at what many of these alliance members have done already to rectify these problems, it is minimal. Yes, so far Countrywide, one of the alliance members, has helped 40,000 borrowers, but of the 40,000 borrowers, how many of those could already afford the new adjusted loan payments? We don't know, Countrywide has never mentioned if any of these 40,000 borrowers were already late on their payments or in fact on the verge of foreclosure. My guess would be none of them were.

But if an alliance has been formed, there should be a standard solution amongst them all right? No, unfortunately not. Along with the Alliance still looking at borrowers situations on a case-by-case basis, they do not have a standard solution to help sub-prime borrowers. Along with loan modification's, "The Alliance" will also be suggesting to borrowers temporary repayment plans and also what I fear will become the standard for "The Alliance", the inevitable short sale. 

Lastly, and most important, what will the loan servicer's do? Will they be willing to modify the loan agreement between the borrower and the lender? They may to a point. When a borrower requests a modification to the loan agreement it is up to the borrower to prove that they cannot afford the upcoming higher reset in their loan payment. The burden of proof is on the borrower. Most servicer's will be hoping borrowers will not be able to do this, seeing how the service process is mostly done by computers, therefore the need for higher skilled and better paid employees are not needed. This is only one portion of the servicing business where a loan servicer keeps their profits up, below average paid employees. But now comes the loan modification process and now these companies have to hire better skilled employees to handle the influx of loan modifications coming in. What does that do their bottom line? Starts cutting into profits. Is it conducive for a loan servicer to continue to modify loan after loan? No it's not.

Therefore, exactly what will the purpose of "The Alliance" be? Public relations pure and simple. Think of a magician, make a lot of noise and flash over here, so you aren't paying attention to what's going on over there. Will it be a total waste? I believe it will help some borrowers, but certainly not enough to make even the slightest dent in upcoming sub-prime adjustable loan resets that are coming up in the foreseeable future. I still believe the best solution is for the FHASecure program. What we need is for the Senate to get back on track and get this program hammered out and passed. Will it help all sub-prime borrowers? No, but I think it will help many more than "The Alliance" will.

Comments (1)

Anonymous
Barbara Hunt
I think the Hope Now program is just another attempt to make the American poor people think that they are going to get some help from this big mess of subprime mortgages.  It just another false lead you go from one community agency to another looking for some assistance to help you keep your home, but the programs only seems to help the people that can help themselves.  The people who need help are the one who have bad credit that the reasons most of them ended up with subprime mortgage anyway.  Give real hope help those indivisual with poor credit keep the American Dream.
Feb 02, 2008 11:56 AM
#1