It’s right there … at the bottom of the monthly statement mailed to homeowners by their lenders:
“Falling Behind on Your Bills? … Having Trouble Paying Your Mortgage?... FREE HELP is available from the HOPE NOW ALLIANCE … a Non-Profit Association formed by the Dept. of Housing and Urban Development (“HUD”) to assist homeowners who are struggling to pay their mortgages."
But what, exactly, IS the “HOPE NOW ALLIANCE?”… and does it truly provide long-term benefit to consumers? Quite simply – and contrary to the “White Knight” impression that the organization tries to put forth – Hope Now is NOT an alliance of “consumer first”, altruistic homeowner advocates, but rather a banking-industry coalition of loan servicers, lenders, investors, and other mortgage market participants.
Formed by the Mortgage Bankers Association (“MBA”) and other financial industry trade associations, Hope Now says it “finds solutions” (heavily slanted toward banks - obviously) to help consumers “avoid foreclosure” and “stay in their homes.” Notably, the Executive Director for Hope Now since its inception has been Faith Schwartz, a Senior Vice-President for Option One Mortgage Company.
Further, the organization’s Board of Directors has been comprised of banking professionals from Goldman Sachs, Westwood Mortgage Corporation, Washington Mutual, the Commonwealth Mortgage Assurance Corporation, and the Federal Home Loan Bank Board. And, its Washington D.C. headquarters are located in the offices of the “Housing Policy Council”, a division of the “Financial Services Roundtable” – a highly influential banking industry lobbying group (See: National Mortgage Professional Magazine (Web), 3/25/10 Edition).
Despite claims by Hope Now that it has assisted a “substantial number” of homeowners since its creation in 2007, critics contend that the assistance provided does not go far enough and that not only a small percentage of homeowners are actually being helped. (See: Les Christie, "Hope Now's numbers don't add up to much help", CNNMoney.com, 4/4/08). In addition to the belief that the organization has little to no impact on the ability of distressed borrowers to remain in their homes “long term” … critics also raise the inescapable point that Hope Now is fully controlled by the lending and financial services industry – a point that seems to be proven by comments made by George Miller, Executive Director of American Securitization Forum (and one of Hope Now’s founding members). While stating in the press release announcing the group’s formation that the Alliance would create procedures "to keep borrowers in their homes" … Miller admitted in a follow-up statement made in the April 2, 2008 edition of the New York Times that Hope Now "represents the interests of investors – and we want to minimize losses on bad mortgages and maximize recovery."
The Alliance also claims that its counselors help homeowners identify “possible sources of assistance”, and that it “provides education” on loss mitigation options such as “loan workouts” or “loan modifications”. However, as banking industry writer Kate Adams reports (See “The Hope Now Alliance Strategy”, Investopedia.com 4/5/08), “The general consensus is that most consumers who contact Hope Now are steered toward “repayment plans” (which are considered far less effective than true, bona fide loan modifications for helping borrowers achieve an affordable payment, and avoid default in the future).
As noted by Dan Immergluck, a Professor from Georgia Tech University (and author of “Foreclosed”, a recent book on the mortgage crisis), Hope Now initially was formed to create the appearance of the mortgage industry taking “strong action” to assist borrowers after changes were made to the Bankruptcy Code. But, as Immergluck observes, while Hope Now is quick to proclaim its so-called “successes” as to providing loan modifications, in reality its practice has been “do whatever you want and call it a loan modification”. (See: Lawson, Michael “A History of Foreclosure Prevention: Lots of Programs, Little Success”, Investigating Reporting Workshop, American University School of Communication, 7/21/11).
Generally, “Repayment Plans” are a way that banks work with borrowers to provide a path toward getting caught up on late payments andcurrent on the original loan. However, with a “Repayment Plan” the loan itself is NOT fundamentally changed to become more affordable for the borrower. As a result, "Repayment Plans" are criticized as "temporary fixes" -- and critics question how a homeowner that could not afford the terms of the original mortgage will be able to do so again since a repayment plan does not reduce the amount owed.
By contrast, a loan modification is a permanent change to the underlying mortgage agreement and typically includes terms such as lowering the interest rate to as low as 2%; extending the payment period/life of a loan; and in some cases, reducing the principal balance on a loan. Local housing counseling groups across the country have voiced frustration that even though many of Hope Now Alliance counselors have good intentions, their “hands are tied” by the banking industry giants that created, and continue to oversee the organization.
Additionally, Hope simply does not have enough trained counselors to answer calls and provide adequate case analysis for the thousand of homeowners hoping for "free help". While the Alliance claims an average of 3,000 – 4,000 calls each day to its 1-888-HOPE-NOW phone number, the Homeownership Preservation Foundation reports that a low percentage (4%) actually speak with a counselor.
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THE BOTTOM LINE: While the HOPE NOW Alliance may have succeeded at raising awareness among distressed homeowners of the need to work with lenders and housing counselors to avoid foreclosure, there is substantial doubt among consumer advocates as to whether or not the group can overcome some of its inherent weaknesses (most notably its lack of an adequate number of trained housing counselors and its close affiliation with firms which represent investors' interests). Only time will tell if it has the resources – and if its participating lenders have the financial motivation - to help stem the foreclosure rate in a meaningful, long-term way.
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