U.S. launches new mortgage aid program

More than 4 million American homeowners, or 9 percent of borrowers with a mortgage, were either behind on their payments or in foreclosure at the end of June, according to the most recent data from the Mortgage Bankers Association.

Indeed, Tuesday’s announcement comes too late for Troy Courtney, a 44-year-old San Francisco police officer.

He moved out of his home in Mill Valley, Calif., earlier this month — taking his children, three dogs and one cat with him — after failing at several attempts to get a loan modification or a short sale. A short sale occurs when the lender agrees to receive less than the loan is worth.

Courtney worked overtime and tapped into his retirement account to try to catch up with two loans on his home. But in the end, he couldn’t persuade Countrywide Financial, which managed the loan for Wells Fargo, to modify the loan.

“I feel like I missed the boat,” he said of the new efforts to help more homeowners. “I’m just mad at the whole system.”

One reason the problem has been so tough to solve for borrowers such as Courtney is that the vast majority of troubled loans were packaged into complex investments that have proved extremely hard to unwind.

Deutsche Bank estimates more than 80 percent of the $1.8 trillion in outstanding troubled loans have been packaged and sold in slices to investors worldwide. Most of those loans won’t likely be helped by the new plan.

The rest are “whole loans,” which are easier to modify because they have only one owner.

Still, after more than a year of slow and weak initiatives, there seems to be a serious effort among major retail banks to get at the heart of the credit crisis: falling U.S. home prices and record foreclosures.

Citigroup said Monday it is halting foreclosures for borrowers who live in their own homes, have decent incomes and stand a good chance of making lowered mortgage payments.

JPMorgan Chase & Co. last month expanded its mortgage modification program to an estimated $70 billion in loans, which could aid as many as 400,000 customers. The bank already has modified about $40 billion in mortgages, helping 250,000 customers since early 2007.

Starting Dec. 1, Bank of America Corp. plans to modify an estimated 400,000 loans held by newly acquired Countrywide Financial Corp. as part of an $8.4 billion legal settlement reached with 11 states in early October.

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