December 7, 2007 Detroit Free Press
BY TODD SPANGLER and SUZETTE HACKNEY
FREE PRESS STAFF WRITERS
WASHINGTON -- A ballyhooed industry plan to freeze interest rates for some subprime mortgage holders met with skepticism in some quarters Thursday as borrowers wondered whether they would qualify and critics said it may be inadequate to address the nation's foreclosure crisis.
The call for help was particularly passionate in metro Detroit, which has one of the worst home foreclosure rates in the nation. On Thursday, the Mortgage Bankers Association released data indicating Michigan is near the top in home mortgage delinquencies and new foreclosures.
"I've been in this for 50 years and I've never seen it like this," said Al Bileti, 72, of Fraser, who works as a consultant for Lake Huron Credit Union in Saginaw and offers credit counseling to fellow parishioners at St. Athanasius in Roseville. "It scares me."
The plan announced by the mortgage industry and the Bush administration Thursday offered some hope to borrowers, provided they got their subprime, adjustable-rate mortgages between Jan. 1, 2005, and July 31 this year and their initial interest will reset between Jan. 1, 2008, and July 31, 2010.
With some 1.8 million loans falling into that category, the industry expects its new program -- which should be up and running within weeks -- to guide as many as 1.2 million homeowners through a process in which hundreds of thousands of them could see interest rates frozen at their initial rates for five years.
Subprime loans are those made to people whose credit histories keep them from qualifying for prime loans with lower interest rates. Many of these loans in recent years have had low initial rates, sometimes called teaser rates, that reset higher after a few years.
Even though the program announced Thursday is voluntary, industry officials and Treasury Secretary Henry Paulson said they expect most lenders to follow through as the value of housing is threatened in many markets across the country.
"The investors who own these loans recognize that foreclosure is costly," Paulson said.
Under the plan, borrowers who believe they will have problems making their monthly payments are asked to contact the companies servicing their loans, or mortgage counselors with the Hope Now Alliance at 888-995-4673.
Borrowers who have no more than one payment delinquent would be guided through a process in which their ability to pay will be determined. If appropriate, they could receive a 5-year freeze or see their loan refinanced.
Detroit Mayor Kwame Kilpatrick, who recently hosted a forum on the foreclosure crisis with the U.S. Conference of Mayors, said he hopes the voluntary program works.
"I'm anxious to see how many families this plan will actually benefit," Kilpatrick said. "Mayors across the nation have been left to pick up the pieces of this subprime tsunami."
But U.S. Rep. John Dingell, a Dearborn Democrat, said the Bush administration and industry plan offers little to southeastern Michigan, where foreclosures have been on the rise for years, unemployment is high and home values are plummeting.
"The president's plan would seem to exclude many of those most in need of help. ... I hope that this is not the final word from the Bush White House on this very important issue," Dingell said.
Industry officials said they are working on a case-by-case basis to reach out to borrowers in trouble.
"I don't believe any servicer gives up on people," said Michael Heid, an official with Wells Fargo Home Mortgage. "Some people will return to renters' status, but it's not for lack of trying."
However, Kenneth Wade, chief executive officer of NeighborWorks, a national network of community development organizations, said he has heard anecdotally from mortgage counselors that many people have run into trouble renegotiating payment schedules.
He said Thursday's announcement gives lenders a chance to disprove those reports.
He also noted that metro Detroit has been hit particularly hard.
"You guys are in the eye of the storm," Wade said. "No doubt about it."
"Many of these people are in denial," Bileti said. "They don't want their families to hear about foreclosures or past-due bills. Often people just go home and get further into debt."
BY TODD SPANGLER and SUZETTE HACKNEY
FREE PRESS STAFF WRITERS
WASHINGTON -- A ballyhooed industry plan to freeze interest rates for some subprime mortgage holders met with skepticism in some quarters Thursday as borrowers wondered whether they would qualify and critics said it may be inadequate to address the nation's foreclosure crisis.
The call for help was particularly passionate in metro Detroit, which has one of the worst home foreclosure rates in the nation. On Thursday, the Mortgage Bankers Association released data indicating Michigan is near the top in home mortgage delinquencies and new foreclosures.
"I've been in this for 50 years and I've never seen it like this," said Al Bileti, 72, of Fraser, who works as a consultant for Lake Huron Credit Union in Saginaw and offers credit counseling to fellow parishioners at St. Athanasius in Roseville. "It scares me."
The plan announced by the mortgage industry and the Bush administration Thursday offered some hope to borrowers, provided they got their subprime, adjustable-rate mortgages between Jan. 1, 2005, and July 31 this year and their initial interest will reset between Jan. 1, 2008, and July 31, 2010.
With some 1.8 million loans falling into that category, the industry expects its new program -- which should be up and running within weeks -- to guide as many as 1.2 million homeowners through a process in which hundreds of thousands of them could see interest rates frozen at their initial rates for five years.
Subprime loans are those made to people whose credit histories keep them from qualifying for prime loans with lower interest rates. Many of these loans in recent years have had low initial rates, sometimes called teaser rates, that reset higher after a few years.
Even though the program announced Thursday is voluntary, industry officials and Treasury Secretary Henry Paulson said they expect most lenders to follow through as the value of housing is threatened in many markets across the country.
"The investors who own these loans recognize that foreclosure is costly," Paulson said.
Under the plan, borrowers who believe they will have problems making their monthly payments are asked to contact the companies servicing their loans, or mortgage counselors with the Hope Now Alliance at 888-995-4673.
Borrowers who have no more than one payment delinquent would be guided through a process in which their ability to pay will be determined. If appropriate, they could receive a 5-year freeze or see their loan refinanced.
Detroit Mayor Kwame Kilpatrick, who recently hosted a forum on the foreclosure crisis with the U.S. Conference of Mayors, said he hopes the voluntary program works.
"I'm anxious to see how many families this plan will actually benefit," Kilpatrick said. "Mayors across the nation have been left to pick up the pieces of this subprime tsunami."
But U.S. Rep. John Dingell, a Dearborn Democrat, said the Bush administration and industry plan offers little to southeastern Michigan, where foreclosures have been on the rise for years, unemployment is high and home values are plummeting.
"The president's plan would seem to exclude many of those most in need of help. ... I hope that this is not the final word from the Bush White House on this very important issue," Dingell said.
Industry officials said they are working on a case-by-case basis to reach out to borrowers in trouble.
"I don't believe any servicer gives up on people," said Michael Heid, an official with Wells Fargo Home Mortgage. "Some people will return to renters' status, but it's not for lack of trying."
However, Kenneth Wade, chief executive officer of NeighborWorks, a national network of community development organizations, said he has heard anecdotally from mortgage counselors that many people have run into trouble renegotiating payment schedules.
He said Thursday's announcement gives lenders a chance to disprove those reports.
He also noted that metro Detroit has been hit particularly hard.
"You guys are in the eye of the storm," Wade said. "No doubt about it."
"Many of these people are in denial," Bileti said. "They don't want their families to hear about foreclosures or past-due bills. Often people just go home and get further into debt."
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