WASHINGTON (AFP) — Eleven large US mortgage lenders have forged an alliance and agreed to mount an "outreach" program to aid stressed American homeowners facing possible foreclosure, Treasury Secretary Henry Paulson announced Wednesday.
The Treasury chief touted the program weeks after President George W. Bush unveiled an initiaitve to help at-risk Americans keep their homes, amid a housing downturn and a related credit crunch which has roiled financial markets.
"More and more homeowners are having trouble meeting their monthly mortgage payments, and foreclosure rates have risen in recent quarters," Paulson said, as he announced the "HOPE NOW" alliance.
Paulson, a former Wall Street executive, said the alliance would aim to help financially-stretched Americans stave off the threat of having their homes repossessed by lenders and banks.
The US housing market has been in a downturn since January of 2006 following a multi-year boom which saw property prices rocket and triggered a building frenzy.
Since the market bubble burst last year, home prices across the country have tumbled, particularly in Florida, Las Vegas and parts of the Midwest, and property sales have also slumped.
The downturn has sparked a sharp rise in the number of homes being repossessed and some economists fear the lingering housing downturn could threaten US economic growth.
Paulson said 11 of the largest US loan servicers representing 60 percent of America's trillion-dollar mortgage market "have come together and formed a partnership to help more Americans keep their homes."
The initiative is aimed at coordinating and improving outreach to struggling borrowers, many of whom are facing higher mortgage payments as adjustable-rate mortgage loans from prior years reset at higher rates.
"A unified strategy and better integration will mean homeowners get better help with their mortgages, servicers get better responses when they reach out to people, and our communities will see fewer foreclosures," the Treasury chief said.
He warned, however, that he was "not announcing we have solved this problem. What we're announcing is a necessary step toward a very important objective."
He said rising interest rates and stagnant or falling home prices are creating "real challenges" for US homeowners and urged more companies to join the alliance.
"Minimizing foreclosures benefits lenders and investors as well as homeowners," the cabinet official said. Paulson was flanked at a news conference by Housing secretary Alphonso Jackson and alliance members.
The housing depression has also hit Wall Street and the mortgage sector hard. Some mortgage lenders have gone out of business while other firms laid off hundreds of workers in a bid to keep afloat.
Some mortgage firms, helped by state and local governments, had already started reaching out to borrowers in a bid to avert fresh foreclosures prior to the creation of the new alliance.
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