According to a story written by Lynnley Browning in Wednesday's New York Times, Hope Now, the White House's initial answer to the country's mounting foreclosures, is failing to provide much help to struggling homeowners, largely because it is operated by the very people who caused the problem in the first place.

Hope Now was established in July of 2007 to serve as a portal for homeowners with subprime mortgages to enter the system and seek help. Persons calling the program's hotline would be plugged into credit counselors and appropriate lenders' representatives, who would, ostensibly, assist them in resolving their problems. The program was expanded in February with the addition of "Project Lifeline" which extended the program to prime and Alt-A borrowers and put a 30-day moratorium on foreclosures in place for those who seek help.



Last month Hope Now released data on its results through the end of January. They claimed to have been responsible for a total of 1,035,000 loan workouts which included 758,000 repayment plans and 278,000 loan modifications. A modification occurs any time any term of the original loan contract is permanently altered ' through a reduction in rate, forgiveness of a portion of the principal, or change in the maturity date. A repayment plan allows the borrower to become current and catch up on missed payments without any substantial or permanent alteration of the loan terms.

The January report stated that the number of modifications as opposed to repayment plans has been rising steadily. In the third quarter of 2007 19 percent of all workouts were modifications; in the fourth quarter it was 35 percent and in January 50 percent of the workouts were modifications ' 45,320 modifications vs. 48,155 repayment plans.

Ms. Browning, however, reports quite different results.

Everyday, she states, more than 4,500 people call Hope Now, but few of them appear to be getting the relief they are hoping for. "One reason is that the financial powers behind Hope Now ' mortgage lenders, loan servicers and big investors ' are reluctant to change loan terms substantially if doing so hurts them."

She says that the group is coming under fire from within and without for putting the interests of lenders over those of borrowers. Hope Now's executive director Faith Schwartz is an executive at the subprime lender Option One Mortgage.

Hope Now is run out of the Housing Policy Council, which in turn is part of the Financial Services Roundtable, the influential financial services lobby. The Roundtable and another big industry group behind Hope Now, the American Securitization Forum, oppose any government housing effort that would require them to take losses on bad mortgage loans. Another component of the Hope Now alliance, the non-profit Homeownership Preservation Foundation, was established in 2003 with a $20 million grant from GMAC-RFC, a mortgage lender.

Ms. Browning's article states that Hope Now employs just three people. Most of its work is done through committees staffed by senior bank and mortgage executives who are part of the Financial Services Roundtable.

Hope Now counselors are urged to follow the guidelines of the American Securitization Forum which represents financial companies that bundle mortgages for sale to investors. The Forum's executive director George Miller told The Times that it represents the interests of investors and "we want to minimize losses on bad mortgages and maximize recovery."

The group's guidelines on loan modifications advise lenders to modify loans case by case rather than across the board. Both the Forum and the Roundtable oppose calls to open up bankruptcy courts for struggling homeowners, a move that could lead to further losses for their members.

The Times article maintains that even Hope Now is unsure of its effectiveness. It does not break out the number of loan workouts that occur as a result of its efforts and those that might have happened anyway. Some people who work with Hope Now say it has done little to keep the housing crisis from deepening.

According to the Homeowners Preservation Foundation, only about four percent of callers to the Hope Now hotline end up talking in person with a mortgage counselor.

"Hope Now is a failure," said Michael Shea, the executive director of the Acorn Housing Corporation, a large counseling agency that is part of the Hope Now alliance. "It's industry-dominated."