Mortgage Industry Warms to Obama's Foreclosure Relief Plan

The ""Association of Community Organizations for Reform Now"":http://www.acorn.org (ACORN) announced last week that a ""recent survey"":http://www.acorn.org/fileadmin/ACORN_Reports/2009/Hope_on_Horizon_Report.pdf it conducted signals ""hope on the horizon"" for struggling homeowners facing foreclosure. The activist group said it surveyed all major mortgage servicing companies in the nation, and has found that at least 76 percent of outstanding mortgage loans are serviced by companies who have committed to implementing the Obama administration's Making Home Affordable loan modification program.
According to a press statement from ACORN, this industry momentum signals strongly that the Obama plan will achieve near-universal industry consensus on foreclosure prevention protocols in short order. These protocols - based on the precedent-setting work of the FDIC when it took over the troubled mortgage portfolio at IndyMac - require due diligence to be performed on each loan before foreclosure, to evaluate whether a loan modification to affordable terms would be less costly.
Participation from the industry in the program is voluntary, although any servicer that takes incentives offered under the Obama plan or is owned by a company receiving government funding going forward will be required to carry out this due diligence.
Based on ACORN's findings, mortgage servicing giants Wells Fargo, Citi, Chase, and Bank of America are committed to implementing the plan. The report also named other leading servicers as participating, including GMAC, Carrington, EMC Mortgage, Home Loan Solutions, Wilshire, Ocwen, Saxon, Select Portfolio Servicing, US Bank, and Greentree Servicing. According to ACORN, these companies have agreed to implement the plan immediately, and review pending foreclosure activity to determine eligibility for federal modifications in each case. A number of other companies, ACORN said, are continuing to perform an internal review or waiting to see the program’s contracts before committing to participate, but not a single mortgage servicer has decided against participation.
ACORN found varying levels of preparedness with regard to the percentage of loans that might be ineligible for modification because of overly restrictive pooling and servicing agreements (PSAs) with investors. According to ACORN, some companies have no such PSA problems, and many others reported that only a small percentage of outstanding loans are governed by prohibitions on modifications like those promoted by the Obama plan.
ACORN's survey showed that those companies running into PSA roadblocks have plans to seek waivers from investors to permit modifications under the federal plan. ACORN said the following comment from Ocwen was typical among respondents: ""We will be seeking consents and/or waivers from the appropriate parties to be able to include those loans in the program.""
ACORN said it expects further buy-in for the program over the coming weeks as the contracts are released for servicers to sign up to participate. The community activist organization said it will continue to encourage all mortgage servicers to join the program, and has plans to target those ""outlier companies that refuse to engage in sensible foreclosure prevention.""
Government officials say they anticipate the mortgage restructuring component of the Making Home Affordable program to bring assistance to as many as 3 to 4 million homeowners.