Mortgage lenders have been pressured by Congress to help homeowners, and many volunteered to "rework" troublesome loans with flexible terms and refinancing. But recent reports show that few are following through on promises. Meanwhile, homeowners are increasingly desperate.

According to recent news reports, 70 percent of delinquent subprime mortgage borrowers are still not getting the help they need to keep their homes. Iowa's Attorney General helped create the State Foreclosure Prevention Working Group, a coalition of nearly a dozen state attorneys general and bank regulators. The coalition works with lenders to help keep homeowners from foreclosure, and it recently issued a report based on statistics from the majority of subprime mortgage service companies. The numbers were alarming, revealing that more than a million loans-around one out of every four-were delinquent at the beginning of this year. About a third of the homeowners holding those loans are already involved in foreclosure proceedings, which represents almost a double-digit increase since last fall.

Ready to explode

The avalanche of foreclosures is not running out of steam, even as the volume of repossessed homes continues to swell. A record number of hybrid adjustable-rate mortgages-worth more than $360 billion-will reset in 2008. Payments on these so-called "exploding ARMs" reset much higher after two or three years, and then subsequently re-adjust as often as every six months. As they hit their expiration deadlines in the last half of this year, many economists expect to see another surge of foreclosures. Banks and mortgage lenders are already trying to unload existing property inventories, but buyers are hesitant to purchase because they expect to see even lower prices and deeper discounts later in the year.

Lenders snubbing government initiatives

Last year, President Bush asked lenders to voluntarily work with borrowers to discover ways to revise or refinance their loans and keep them from foreclosure. He also pressed government officials to publicize options available to homeowners in terms of refinancing away from problem loans. Programs like Hope Now and Project Lifeline were established with great fanfare, to bring lenders and borrowers together and come up with creative solutions to save people from financial crisis. But state prosecutors report that only half of the homeowners who are facing foreclosure have even been contacted by their lenders. Despite all sorts of pressure, promises, and debate about policy solutions to address the crisis, National Public Radio recently reported that for every foreclosure postponed or prevented, more than a dozen homes enter foreclosure.

One of the reasons for the foot dragging by lenders is that, while they stand to lose less money if they can help homeowners avoid foreclosure, to do so means forgiving large amounts of existing mortgage debt. But most of that debt has already been sold and promised to investors. Those investors could sue lenders for lost revenues if interest rates or outstanding balances on loans are lowered. Beholden to Wall Street, lenders tend to favor investors over delinquent homeowners.