Countrywide Financial, one of the nation's largest subprime lenders, has reached an agreement with the Association of Community Organizations for Reform Now (ACORN), a vocal subprime critic, on a plan to help distressed borrowers avoid foreclosure.
Meanwhile, in another sign of growing concern about rising foreclosures, the Bush Administration has announced "Project Lifeline," a new program to help any homeowner not just those with subprime mortgages who face imminent foreclosure.
Six of the nation's largest financial institutions have agreed to place a freeze on all foreclosure action for 30 days. During that time, administration officials say homeowners will have the opportunity to work out more affordable terms.
The Countrywide-ACORN agreement is designed to help borrowers who are delinquent on their subprime loan payments find new, more affordable terms.
At the same time, the agreement addresses home retention options and procedures for borrowers in various stages of mortgage delinquency, not just borrowers who are current in their payments. Critics of earlier efforts have said homeowers in the most need of assistance were excluded from early programs.
The company said the new initiative broadens the approaches of its previously announced $16 billion home retention program and the industry-backed Hope Now Alliance.
"Countrywide is eager to work with borrowers, whether they are facing rate resets or some other type of financial difficulty," said Michael Gross, managing director of loan administration for Countrywide. "Through this partnership, Countrywide and ACORN have agreed to a set of home retention standards to help borrowers who are in various situations of financial difficulty to establish suitable repayment plans or other solutions."
Gross said the plan would offer "affordable home retention solutions for borrowers, while offering the investors in the loans a more attractive alternative than foreclosure."
Previous efforts to reduce foreclosures have focused on borrowers with adjustable rate mortgages, whose rate resets often resulted in huge increases in the monthly payment. The new plan also helps borrowers with fixed rate loans.
According to the Mortgage Bankers Association, the delinquency rate for subprime mortgages with fixed rates is over 12 percent. The subprime ARM delinquency rate is just under 20 percent.
Negative reviews
The new program comes at a time when initial foreclosure avoidance plans are getting negative reviews.
While banks have taken advantage of falling interest rates to step up loan activity, borrowers complain that only those with sterling credit are able to borrow money. Consumers with poor credit those in the subprime category are still finding it difficult, if not impossible, to borrow money or negotiate new terms.
Countrywide says its new partnership program with ACORN is designed to rectify that problem. Countrywide customers wishing to negotiate a workout program or receive counseling should call 800-669-6650, or contact the ACORN Housing call center at 866-67-ACORN for counseling assistance.
