NEW YORK (CNNMoney.com) -- Lenders have helped 1,178,000 troubled home owners as part of a Bush-administration led housing rescue effort, according to numbers released Thursday by the Hope Now coalition.
But it's still not clear from the data, which are from July, 2007 through the end of February, exactly how effective Hope Now has been in keeping people in their homes.
During those same months nearly 419,000 borrowers lost their homes through foreclosures, according to Hope Now.
The administration-backed coalition of lenders, investors and community groups only breaks down its numbers into two categories: repayment plans and loan modifications. Repayment plans give borrowers time to make up missed payments, while loan modifications permanently reduce a loan's principal, interest rates, or both.
Out of the 1,178,000 Hope Now loan workouts, 848,000 were repayment plans, which are generally not as helpful to troubled borrowers.
These plans just exacerbate the problem, according to Federal Deposit Insurance Corp. Chairman Sheila Bair, since borrowers are in trouble because they couldn't afford the original monthly payments in the first place.
Still, the proportion of modifications by Hope Now has improved. In 2008, nearly 37% of the workouts were classified as modifications, compared with only 25% in 2007.
Hope Now classified only 331,000 (up from 278,000 through January) of its workouts as "modifications," in which balances, interest rates or both are lowered. These are usually better for at-risk borrowers because they're tailored to what they can afford to pay.
But not all of what Hope Now calls modifications involve principal reductions or interest-rate cuts; the coalition also lumps temporary interest-rate freezes into this category, as well as extensions in the lengths of mortgages, from 30 years to 40, for example. Those offer only limited relief for many at-risk homeowners.
In fact, 40% of the subprime, adjustable rate mortgage borrowers who went into foreclosure in the three months ended September 30 - the most recent figures available - had already gone through a workout with their lenders, according to a study from the Mortgage Bankers Association.
For borrowers in housing markets where prices are declining, deferred payments are particularly problematic, adding to balances that are often already higher than their home values.
"[Repayment plans] put more loans upside-down," said Jim Carr, chief operating officer for the National Community Reinvestment Coalition. He adds that this makes borrowers more likely to walk away from their mortgage if they get behind again, since they have no equity to lose.
Carr pointed out that, Hope Now's claims not withstanding, foreclosure rates continue to soar. "We're en route to possibly 2 million foreclosures this year alone," he said. "It's so important that, rather just putting out stats to look good, that something is actually accomplished."
Both the Bush administration and Congress have been pursuing plans that could quickly boost the numbers of more comprehensive loan workouts. The plans make use of the Federal Housing Administration (FHA).
Under the administration plan, the FHA would, for the first time, allow some borrowers who have fallen behind of their payments to refinance with FHA-insured loans. That could help a half million homeowners this year.
The deal would require that lenders take a hit if a home value has slipped below the mortgage balance; the lenders would have to write down the mortgage to either 97% of the market value or 90% for borrowers in default.
House Finance Chairman Barney Frank has a proposal that he said could help 1.5 million borrowers, would require lenders to write down loan balances to 85% of market values. Then, the loans would be converted to FHA insured mortgages.
Additionally, the Senate on Thursday passed a bipartisan package of tax breaks and other steps designed to help businesses and homeowners weather the housing crisis. See Also
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