Given higher oil prices, contraction in the capital markets and a downturn in the housing sector, a slowing economy appears imminent, said Robert Steel, undersecretary of the Treasury for Domestic Finance, who gave the keynote speech last Tuesday at the American Securitization Forum's (ASF) annual conference in Las Vegas. Minimizing the amount of homeowner delinquencies, which could be exacerbated by a lagging economy, is HOPE NOW, Steel said, which he maintained is at the forefront in reducing the number of foreclosures in the market.
HOPE NOW, an alliance formed between counselors, lenders and investors in order to reduce foreclosures among homeowners, is now receiving up to 4,000 calls per day from borrowers, up from 625 calls per day in August 2007, Steel said. He added that all HOPE NOW servicers are contacting subprime borrowers 120 days before their loans reset in order to identify potential delinquencies, another improvement from August, when the group was reaching out to only a select number of borrowers.
After reviewing the rise of the global securitization market and the missteps and malfeasance that were made as the industry continued to expand, Steel touted one of HOPE NOW's alliance members and host of the conference, the ASF, for its ability to bring the market together in order to work out these issues, as well as its efforts in working with the U.S. Department of the Treasury in order to help distressed homeowners, including its most recent guidance on streamlining foreclosure and loss avoidance.
However, the audience did not appear overly enthusiastic about Steel's projections for improvement. One attendee questioned whether the homeowner is really being considered or whether industry organizations like the ASF are merely concerned about liquidity returning to the market - an assertion Steel vehemently disagreed with, adding that in a word search of his keynote speech, "homeowner" is probably the most commonly used term, he said.
In response to another question challenging the impact of HOPE NOW if borrowers do not reach out to the organization, Steel brought attention to the fact that the alliance was a private, leading industry organization, which is more acceptable to borrowers than receiving letters directly from the government. (The group was set up with the encouragement of the Department of the Treasury and the Department of Housing and Urban Development.)
The alliance has also employed the help of community groups such as churches and NeighborWorks to counsel borrowers, Steel said, agreeing with an attendee that a counselor working side by side with the borrower and the servicer is the most effective tool in foreclosure prevention. However, the attendee suggested that visiting the borrower directly is the only truly effective way to prevent foreclosure.
When asked whether other loss mitigation techniques, such as short sales, are being considered as alternatives for troubled borrowers, Steele said it was not his decision to make. "I will leave that up to agencies like HOPE NOW to make these decisions," he said.
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