The foreclosure problem is so immense that neither government nor private lenders has yet come up with an all encompassing solution.  Both entities, however, are trying to find ways that help homeowners while preventing further losses from foreclosures.

Early responses to the government-led Hope for Homeowners program have been discouraging. What was hoped to be a way out for 400,000 trouble homeowners may now only attract 20,000 borrowers, according to Department of Housing and Urban Development spokesman Steve O'Halloran.  Only 42 applications have been processed to date.  Though it is too early to write the obituary for the fairly new program, it requires lenders to voluntarily agree to modify terms (including the loan value) and requires borrowers to share the profits, if any, with the government.  Lenders prefer to leave the principle as is but adjust interest and payments.

On the lender side, there are more indications this week that lenders are more willing to do all three things.  Banking giant Citigroup announced a moratorium on foreclosures to help 500,000 homeowners stay in their homes.  The motive may not be altruistic, as Citicorp is aiming to stem losses over the past four quarters, but still the announcement is good news for those who are not currently behind on their payments but who need help keeping up.  The proactive move on the part of Citigroup will reach about 1/3 of their mortgages, worth about $20 billion.  It is aimed at those who have sufficient money to make affordable mortgage payments.  The bank, never in the player in the subprime market like Countrywide, (now owned by Bank of America), has offered similar foreclosure-prevention programs to about 370,000 since early 2007.

Another initiative to combat foreclosure by assisting delinquent borrowers was announced this week by the Federal Housing Finance Agency, overseer of Fannie Mae and Freddie Mac.  Those who are 90 days or more delinquent on their loans can participate in a new program that simplifies the loan modification process.  Instead of reviewing the borrowers' credit report and tax returns, the program looks at how much the can afford to pay based on income.  The new payment will not exceed 38% of the borrower's income and may be for an extended loan term at reduced interest to make payments lower.  If all the adjustments don't reduce the payment enough, part of the principle may be deferred until the end of the loans.  The formula used for determining the new payments are expected to be adopted by major lenders like Bank of America, Wells Fargo, and Citigroup for the loans they administer for Fannie Mae and Freddie Mac.