Distressed Owners Are Frustrated by Aid Group

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By Lynnley Browning

Every day more than 4,500 people call Hope Now, the White House-backed group formed to help struggling homeowners.

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.

Almost six months after Hope Now was created, the group is largely resisting calls for broad relief for homeowners. In Washington, a furious debate is under way over whether to help homeowners on the brink of default, and several possible plans are starting to coalesce.

But Hope Now, which President Bush has held up as a crucial tool to fight foreclosures, is coming under fire from within and without, accused of putting the interests of lenders over those of borrowers.

Hope Now says it is succeeding. The group, which also includes nonprofit organizations that advise people on managing their debts, says it has helped more than a million people avoid foreclosure.

But Hope Now does not disclose details about how the loan modifications and payment plans it ostensibly helps to broker actually help homeowners. Many people merely get the chance to catch up on late payments.

Even Hope Now says it is unsure how effective it is. The group 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.

"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."

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.

William A. Longbrake, the vice chairman of Washington Mutual, the big savings and loan, is a senior policy adviser to the roundtable. He said he has "indirect, inferential evidence" that Hope Now is helping.

But the group itself 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's executive director, Faith Schwartz, is an executive at the subprime lender Option One Mortgage.

People who dial Hope Now's toll-free number, 1-888-995-HOPE, typically are routed to call centers in Phoenix and Spokane, Wash. Three out of four eventually are connected to credit counselors for a free, informal consultation.

But only a fraction of all callers - about 4 percent - ends up talking in person with a housing counselor, according to the Homeownership Preservation Foundation, a nonprofit group at the center of Hope Now that also has ties to the mortgage industry.

Ms. Schwartz defended the group's work. She said Hope Now is "leveraging existing infrastructure" to help homeowners.

Kenneth Goodman, a homeowner in Fontana, Calif,. said he did not have a good experience trying to get help through Hope Now.

Mr. Goodman, 53, said he had called Hope Now three times in recent months because he was struggling to pay the mortgage on his two-story tract home. The first time he was referred to a mortgage escrow company. The second time, "I got someone oblivious to everything," he said. The third time the counselor told Mr. Goodman that he had a choice: Sell his home for less than the value of his mortgage, or face immediate foreclosure.

"It was all unhelpful," Mr. Goodman said. He worries that he will lose his home.

There are Hope Now success stories, but the group declined to point to any.

During a tour of a Hope Now counseling agency last Friday, President Bush cited the case of Danny Cerchiaro, a movie producer. Through Hope Now and a counselor that he called "the magic lady," Mr. Bush said, Mr. Cerchiaro was able to refinance the adjustable-rate mortgage on his home in Iselin, N.J., at a more affordable rate.

But the Financial Services 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.

"We support the broad objectives of the alliance," said George Miller, the executive director of the American Securitization Forum, which represents financial companies involved in bundling mortgages into securities for sale to investors. "But we represent the interests of investors, and we want to minimize losses on bad mortgages and maximize recovery."

Hope Now counselors are urged to follow the securitization group's guidelines on loan modifications, which 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 Homeownership Preservation Foundation, for its part, says little about that part of the mortgage market where all the trouble began: subprime loans. According to a fact sheet from the foundation, which was established in 2003, with a $20 million grant from GMAC-RFC, a lender, foreclosures typically result from "medical issues or abrupt changes in income and expenses."

The sheet does not mention subprime mortgages. The foundation's seven-member board includes Sandor E. Samuels, the chief legal officer of Countrywide Financial, the mortgage giant that has come to symbolize many of the excesses of subprime lending.

Colleen Hernandez, the executive director of Homeownership Preservation Foundation, called her organization "a hybrid of corporate and nonprofit cultures." She said the foundation's 10 affiliated credit counselors working with Hope Now have special training in default counseling. But such counselors typically provide only generic financial planning advice. Housing counselors, by contrast, negotiate with lenders to reduce a borrower's mortgage.

The credit counselors "don't say, here's my recommendation, let's call the servicer and insist on that option," Ms. Hernandez said.

In some cases, she said, servicers and banks listen in on the calls between homeowners and the counselors with the knowledge of the homeowners.

Under a deal set to expire in June, the foundation bills the mortgage servicers $100 for each session, then transfers that money to the appropriate credit counseling agency.

Ms. Hernandez said the foundation also hoped to get paid for the calls that do not go beyond the initial call centers. "It has value to the servicers and banks," she said.

The American Securitization Forum, for its part, has said that "in some instances" its members will pay for the counseling fees.

Ms. Hernandez said that callers typically wait less than 30 seconds to be connected to a call-center operator. But on Monday evening, a reporter who called Hope Now was kept on hold for 50 minutes before hanging up. During that time, a recorded message urged the caller to "start an online counseling session" at hopenow.com.

In recent weeks, Hope Now has had trouble explaining its mission on that Web site. In mid-March, a link on the site inadvertently directed people to a Florida company that sells foreclosed properties.

The Home Preservation Foundation is considering venturing into foreclosed property itself, a move that might strike hard-pressed homeowners as odd given its name and its role in Hope Now.