HUD Woos Banks into Foreclosure Program

The Department of Housing and Urban Development has rehashed its old plan in an effort to win over banks to its foreclosure program.

Hope for Homeowners would be modified under existing provisions in the $700 billion financial-rescue plan that Congress put into effect last month. The revised HUD program seeks to expand the number of banks or lenders by lowering the cost for applying to the program.

Under the proposal, the loan-to-value ratio requirement would be set to 97 percent. The law requires a 90 percent loan-to-value ration. The cut would allow lenders to decrease the home loan principal of $200,000 to $194,000. This would mean a smaller loss than the $180,000 under the current requirement.

The Bush administration's Hope for Homeowners foreclosure prevention program has attracted little interest from mortgage holders ever since it started October 1 of this year. According to a senior administration official, the program has been largely unsuccessful since it requires banks to let go of a big portion of troubled loans. So far, the HUD has received around 70 applications and only around 30 lenders.

HUD Spokesman Stephen O'Halloran says that the administration is continuously looking for ways to alleviate the housing problem. He also believes that Hope for Homeowners would allow homeowners facing foreclosure to tap into an added resource to refinance affordable loans.

On a national scale, the number of foreclosure properties has been approaching 300,000 each month. There are usually two or more filings for each actual foreclosure. The figures are alarming as millions of people stand to lose their homes in the coming years.

Meanwhile, administration officials and opposition have been debating and investing their time on complex schemes to address the problem. Congress has passed various proposals which aim to finally stem foreclosures; none have been successful so far. On its side, the Treasury Department has invested the bailout money on recapitalizing banks in exchange for a small dividend. The measure has been highly criticized by Congress.