Hope Now helps fewer homeowners in May

updated 4:44 p.m. ET July 2, 2008

WASHINGTON - The pace of the mortgage industry's efforts to assist troubled borrowers declined in May, as critics questioned lenders' progress in aiding U.S. homeowners facing foreclosure.

Hope Now, a group backed by the Bush administration to help stem the mortgage crisis, said Wednesday that about 169,000 borrowers received some form of loan workout in May, down from 177,000 a month earlier. The group said it is on pace to assist about 520,000 borrowers in the second quarter, the highest number in any quarter since the effort started last year.

Foreclosures, meanwhile, have continued to escalate. According to Hope Now's data, sales of foreclosed properties were running at nearly 82,000 per month in April and May, up from a pace of about 66,000 per month in the January-March period.

Nationwide, 261,255 homes received at least one foreclosure-related filing in May, up 48 percent from the same month last year and up 7 percent from April, according to foreclosure listing service RealtyTrac Inc.

Federal lawmakers call the industry's efforts inadequate and are pushing for a new $300 billion program to allow the government to back new loans for struggling homeowners. Supporters are hopeful the measure could clear Congress this month.

Consumer advocates say permanent home loan modifications, in which a mortgage company agrees to reduce the interest rate or make other changes, are the best way to help borrowers. The mortgage industry's statistics include repayment plans, which allow borrowers to get back on track after missing payments.

Housing advocates nationwide have been frustrated with the industry's efforts, as mortgage companies remain reluctant to make dramatic changes to loan terms, said Alys Cohen, a staff attorney at the National Consumer Law Center in Washington.

"They're not providing affordable (workout) plans," she said.

But the Hope Now group — whose members include Bank of America Corp., Citigroup Inc., Washington Mutual Inc. and Wells Fargo & Co. — says loan servicers, which collect and distribute mortgage payments, have stepped up the pace of modifications in recent months. Loan modifications accounted for about 42 percent of total workouts in April and May, up from 35 percent in the January-March period.

Last month, the Hope Now group was criticized by a federal bank regulator, Comptroller of the Currency John Dugan, who questioned the accuracy of the trade group's data, calling them "aggregate, unverified results from individual firms."

Hope Now's director, Faith Schwartz, defended the group's numbers Wednesday, saying they are collected from 22 companies and extrapolated to approximate industrywide numbers. The group said it is working with bank regulators to develop a common set of standards for such reports.

The industry is "confident that the information it is receiving from its members and the methods being used to compile its monthly reports are reliable," Schwartz said in a prepared statement.

The alliance says 1.7 million homeowners have received loan workouts since July 2007. Of those, 31 percent were permanent modifications.

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