Hope for Homeowners Mortgage Program Needs Makeover

Hope for Homeowners, one of the first mortgage rescue programs, has been a dramatic failure. Designed and advocated as a foreclosure prevention program, it has only received 451 applications, closed a mere 25 loans, and none have been insured by the Federal Housing Administration (FHA).

The original $300 billion federal mortgage guarantee program was projected to help 400,000 homeowners prevent foreclosure. Lawmakers now seek to revisit the Hope Homeowners program with legislation backed by a US House Financial Services Committee.

Last year Congress created the Hope for Homeowners program to aid homeowners in refinancing risky adjustable rate mortgages for more stable 30-year fixed-rate mortgages. The concept consistently draws interest and inquiries from consumers and lenders--the FHA reports over 66,000 inquiries about Hope for Homeowners.

Meg Burns, director of the program, testified to a House panel citing tight restrictions on qualifications and high fees as primary reasons for failure.

Opponents of the revisions in Hope for Homeowners program argue that the program was fundamentally flawed and fixing it will only waste more taxpayers money. Many of the restrictions being lifted were intended as taxpayer protections against absorbing high mortgage default losses from these mortgagerefinancings.

The House committee approved a bill that package legislation for lowering standards for participation, reducing consumer costs, and conforms more closely to other Federal mortgage assistance programs. Also included in this package are safe harbor provisions for mortgageservicers doing loan modifications and permanently increases FDIC deposit insurance to $250,000 per account.