Major lenders embark on a rescue mission to halt the wave of foreclosures sweeping the nation and delaying a housing market recovery.
The home-loan industry, facing the worst housing downturn since the early 1990s, is ramping up efforts to help strapped borrowers stay in their homes.
The goal is to restrain a gathering wave of foreclosures that carries big costs for both lenders and borrowers.
This rescue effort isn't expected to save every at-risk homeowner. But it promises to reduce monthly payments for many who have fallen behind on mortgages. In the process, it could help to stabilize a struggling real estate market.
So far the housing slump, precipitated in part by overzealous borrowing and subprime lending, continues its downward slope. In discouraging news for homeowners and homesellers nationally, a report Tuesday showed "the deceleration and declines in home prices are showing no signs of turnaround." Citing February data, Standard & Poor's Case-Shiller index of housing prices in 10 cities posted a 1.5 percent drop from February 2006 – an annual decline not seen in 15 years.
That news follows hard on a revised 2007 price forecast by the National Association of Realtors. NAR said this month it no longer expects the median price of an existing home to rise this year, predicting instead a 0.7 percent decline. The slower recovery, it said, is a result of "tighter lending criteria and fallout from the subprime loan debacle."
Some lenders offer to refinance
Impelled by financial and political pressures to try to curtail foreclosures, lenders are taking action on several fronts:
• Fannie Mae, America's leading mortgage lender, says it plans to help as many as 1.5 million "subprime" borrowers – people with low credit ratings – refinance out of high-interest loans.
• Freddie Mac, which like Fannie Mae is a government-backed corporation, is creating new products to make homes more affordable to buyers with poor credit. Freddie Mac doesn't make loans directly but pledges to buy as much as $20 billion worth of these mortgages from participating lenders.