WASHINGTON (AP) - In the most sweeping effort so far to help troubled homeowners, the federal government and the mortgage industry on Tuesday will announce a plan to streamline the assistance process for hundreds of thousands of delinquent loans held by Fannie Mae and Freddie Mac.
The Federal Housing Finance Agency, which seized control of the two mortgage finance companies in September, scheduled a press conference for 11:00 a.m. PST. Scheduled to attend were officials from the Treasury Department, Wells Fargo & Co., the Department of Housing and Urban Development and Hope Now, an alliance of mortgage companies organized by the Bush administration last year.
An industry official who worked on the plan said the new approach will allow lenders to modify more delinquent loans by establishing broad criteria to speed up the process. The official spoke on condition of anonymity because details had not been announced.
The new initiative will likely have tremendous importance because Fannie Mae and Freddie Mac own or guarantee about half of U.S. home loans.
To qualify, borrowers would have to be at least three months behind on their home loans, and would need to have home loans worth at least 90 percent their house's value. The interest rate or principal amount of the loan would be reduced so that borrowers would not pay more than 38 percent of their income on housing expenses, the industry official said.
The announcement comes as major banks are stepping up their efforts to curtail losses from souring mortgages. More than 4 million American homeowners with a mortgage were at least one payment behind on their loans at the end of June, and 500,000 had started the foreclosure process, according to the most recent data from the Mortgage Bankers Association.
Citigroup announced late Monday it is halting foreclosures for borrowers who live in their own homes, have decent incomes and stand a good chance of making lowered mortgage payments. The New York-based banking giant also said it is also working to expand the program to include mortgages for which the bank collects payments but does not own.
Additionally, over the next six months, Citi plans to reach out to 500,000 homeowners who are not currently behind on their mortgage payments, but who are on the verge of falling behind. This represents about one-third of all the mortgages that Citigroup owns, the bank said.
Citi plans to devote a team of 600 salespeople to assist the targeted borrowers by adjusting their rates, reducing principal or increasing the term of the loan.
Late last month, JPMorgan Chase & Co expanded its mortgage modification program to an estimated $70 billion in loans, which could aid as many as 400,000 customers. The New York-based bank has already modified about $40 billion in mortgages, helping 250,000 customers since early 2007.
Bank of America, meanwhile, has said that starting Dec. 1, it will modify an estimated 400,000 loans held by newly acquired Countrywide Financial Corp. as part of an $8.4 billion legal settlement reached with 11 states in early October.
AP Business Writer Sara Lepro contributed to this report.
(Copyright 2008 by The Associated Press. All Rights Reserved.)