212,000 borrowers avoid foreclosure in Sept.
Foreclosure prevention group Hope Now says it's helped 2.5 million home owners since the start of the housing crisis last summer.
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| 5/1 ARM | 4.30% |
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NEW YORK (CNNMoney.com) -- Mortgage lenders have helped nearly 2.5 million troubled homeowners avoid foreclosure since the mortgage meltdown began in the summer of 2007.
That's according to the latest report from Hope Now, the coalition of banks, mortgage-securities investors and housing counselors formed by the Bush administration to stem the foreclosure crisis.
Hope Now members helped 212,000 borrowers stay in their homes in September, a new record and an increase of 12% from August.
Despite Hope Now's best efforts, however, many homeowners are still falling through the cracks. According to Hope Now, 85,793 homes were lost to foreclosure in September, down 1% from August. At that rate, more than a million families will have their homes repossessed in the next twelve months.
"There's a lot of help being offered and a lot of people actively seeking help," said Faith Schwartz, director of Hope Now.
Indeed, it isn't clear just how many U.S. homeowners are currently in trouble. But the most recent report from RealtyTrac, the online marketer of foreclosed properties found that there were 265,968 new foreclosure filings issued in September alone.
Schwartz says that her mission is to get the word out to borrowers to that help is available. Too many homeowners fail to act early, when repayment problems are still manageable.
"This is an emotional issue for homeowners," she said, "and our job is to help them not lose heart, help them to stay engaged and realize there is help out there."
But Hope Now's efforts are still dominated by repayment plans, which add overdue balances to upcoming payments, and are generally considered to be a less effective means of helping borrowers. In September, 53.8% of Hope Now's workouts were repayment plans. The proportion of mortgage modifications, which permanently change the terms of a mortgage to make them less onerous, climbed from 41.7% in August to 46.2% of all workouts in September.
The good news is that several new foreclosure-prevention efforts on the part of Hope Now members are starting to kick in, and that should boost the number of homeowners that get help.
On Oct. 1 the Hope for Homeowners program, which was a part of the massive housing rescue bill passed in July, went into effect. Under it, the Federal Housing Authority will guarantee refinanced loans if lenders agree to write down the mortgage balances to 90% of a home's market value.
Meanwhile the failed bank IndyMac, which is now under the conservatorship of the Federal Deposit Insurance Corporation, has rolled out a standard protocol to reduce mortgage payments to 38% of pre-tax income for troubled borrowers who qualify.
Bank of America (BAC, Fortune 500), which bought defunct lender Countrywide, has a similar program that will begin in December and use an even more generous 34% debt-to-income ratio.
Says Schwartz: "There's just more focus on doing everything we can to help folks avoid foreclosure." 
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