A Helping Hand for Harried Homeowners

By Michelle Singletary
Thursday, July 17, 2008

The Neighborhood Assistance Corporation of America is doing something that should have been done a long time ago.

Beginning this Saturday, the nonprofit housing advocacy organization will host a free, five-day "Save the Dream of Homeownership" event here in Washington where people can get immediate help restructuring their troubled mortgage loans.

Homeowners won't have to wait weeks for a callback from their loan servicers. They won't have to fret and fuss -- and in some cases cuss -- to get a mortgage servicing company to listen to their pleas to save their homes from foreclosure.

"We'll be able to provide real solutions," said Bruce Marks, NACA's chief executive.

More than 300 NACA counselors, certified by the Department of Housing and Urban Development, will be at the Capital Hilton hotel to provide same-day, affordable mortgage restructurings that may include reduced interest rates and/or reduced loan balances.

Marks said he expects more than 5,000 homeowners, some of whom may drive eight hours or more from Ohio, Massachusetts and other Eastern states. The event is open to people who own and occupy their homes.

NACA estimates a counseling session will take about two hours. Appointments are encouraged, but walk-ins will also be helped. For those with troubled mortgages who cannot get to Washington, help is still available. Homeowners can call 888-302-6222 during the event to speak to a counselor, although those sessions will not provide an immediate restructuring solution. For more information, go to http://Naca.com.

To make the fast-track restructuring program work, NACA has gotten agreements with major mortgage loan servicers, including Citigroup and Countrywide (now owned by Bank of America).

"Citi is moving aggressively to help distressed borrowers maintain homeownership," spokesman Mark Rodgers said. "It's important for us to engage as quickly as possible with distressed borrowers to work on solutions. Citi signed an agreement with NACA this year to reduce the interest rates and/or the principal balance on certain eligible mortgages of distressed borrowers we service to make them affordable over the long-term. And through its program, NACA puts us in touch with some borrowers we might be unable to reach otherwise."

Here's what makes this event unprecedented: If loan servicers refuse to work out a restructuring, NACA is going to take the rejected homeowners to Capitol Hill and complain to their congressional representatives.

"Our frustration has been that some of these servicers have not done what we need them to do," Marks said.

I love this aggressive strategy. For months, many financial institutions have said they are working hard to keep people in their homes. And yet the number of foreclosures keeps rising. Some reports indicate that not enough people are being helped by the mortgage workout plans endorsed by the Bush administration.

At this Save the Dream event, homeowners won't be refinancing their loans, Marks said. They won't be getting loan modifications that only fix their mortgage crisis temporarily. They won't be offered adjustable-rate mortgages.

Instead, based on its own underwriting system, NACA will take homeowners through four steps, including a forensic-type examination of their budgets.

"We are going to be doing what should have been done on Day One of when they got that mortgage," Marks said. "We are going back to the basics."

By documenting people's net income and expenses, such as food and utilities, housing counselors will analyze a participant's financial situation and figure out the mortgage amount that homeowner can truly afford long-term.

Homeowners have to bring pay stubs, bank statements and other financial information. Free credit reports will also be pulled to check other liabilities.

Once all their information is verified, NACA will present restructuring packages, which may include drastically reduced fixed-rate mortgages, to loan servicers. In some cases it could result in a reduced loan amount. All the rates under their program are fixed for 30 years, Marks said.

Here are two examples of mortgage restructures that were approved by servicers working with NACA's Home Save program:

· Joseph and Kathleen Renaud of Worcester, Mass., renegotiated their 11.875 percent loan with Countrywide to a fixed 5.25 percent. Monthly savings: $830.

· Melody Weathersby of Jackson, Miss., restructured her 14.625 percent loan with GMAC Homecomings Financial to a 6.75 percent fixed rate. Additionally, she cut her mortgage debt by $20,000. She's saving $300 a month.

If the loan amount is actually reduced, servicers may agree to write off the amount or attach it to the balance owed. But the money owed would only be repayable if the borrower sells the home for a profit or does a cash-out refinance.

This process may be hard for some people. Getting a restructured loan package means participants have to agree to operate under a bare-bones budget. That means eliminating unnecessary expenses. Some people may have to cut back on their cable TV or cellphones if such monthly expenses are deemed too high. Some may be forced to downsize to a less-expensive car or sell a second family vehicle.

"People are going to have to reduce their standard of living," Marks said. "There are going to be a lot of shared sacrifices."

I like what NACA is doing. If there is going to be a meaningful fix to the current housing crisis, there will need to be pressure like this on financial institutions -- and everyone is going to have to sacrifice.

· On the air: Michelle Singletary discusses personal finance Tuesdays on NPR's "Day to Day" program and athttp://www.npr.org.

· By mail: Readers can write to her at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071.

· By e-mail:singletarym@washpost.com.

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