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Mortgage industry coalition Hope Now says it helped a record number of homeowners last month, but 82,000 homes were still lost to foreclosure.

Last Updated: July 30, 2008: 10:37 AM EDT


NEW YORK (CNNMoney.com) -- A record number of American homeowners are seeking - and getting - help to solve their mortgage woes.

According to the Hope Now coalition of mortgage lenders, servicers, investors and community advocacy groups, more than 76,000 at-risk mortgage borrowers had their loans permanently modified in June to make them more affordable, with lower interest rates, reduced principal or both. That's up about 9% from May and 26% from January.

Another 105,000 homeowners were given repayment plans, which means that they'll have extra time to make up missed payments. Repayment plans, which don't reduce a borrower's debt load and are generally considered to be less effective at helping homeowners, made up about 58% of all the mortgage work outs in June.

"The industry continues to accelerate the pace at which it is helping homeowners and expects this positive trend to continue," said Hope Now's Executive Director Faith Schwartz.

Hope Now says it has helped a total of 1.9 million homeowners since its program launched in July, 2007.

But all this has still failed to stem the rising foreclosure tide. The coalition reported that more than 82,039 people lost their homes to foreclosure during the month, up 12% from May. This flood of vacant homes on the market is pushing prices down further. On Tuesday, the S&P/Case-Shiller 20-city Home Price Index showed that in May home prices dropped a record 15.8% from a year ago.

A new law
The Hope Now report was released just hours after President Bush signed the massive housing rescue bill, which allocates $300 billion to help at-risk borrowers refinance their unaffordable old mortgages into new low-cost fixed-rate loans insured by the Federal Housing Administration.

That will give Hope Now's 26 members another means to help homeowners. Under the bill, lenders and servicers must voluntarily lower borrower's mortgage balances to 90% of current market value, and pay the FHA a fee equal to 3% of the new principal.

The group also reported the results of a survey of its members it conducted to determine the extent of the industry's exposure to subprime ARM resets.

It found that about 928,000 of these loans had been scheduled for reset during the first half of 2008. Of that total, some 382,000, or 41%, have been refinanced, while 57,000, or 6% of them, have been modified and given more favorable loan terms. Less than 1% of these borrowers who were current with their payments when their loan reset went into default.

Better guidelines
Hope Now recently introduced a number of revised policies in order to help more delinquent borrowers stay in their homes.

It has pledged faster response times to borrowers seeking work outs. That means its members will acknowledge work out requests within five days, keep borrowers informed on the status of the work outs and give them either an approval or denial, within 45 days.

Hope Now has also stepped up its outreach efforts, making sure at-risk borrowers are aware of work out options. Its members are sending letters to subprime adjustable rate mortgage (ARM) borrowers 120 days before their loans reset warning them that their payments will go up soon, and offering credit counseling.

Additionally, the coalition has teamed with community groups to participate in 14 massive foreclosure prevention work shops around the country, which put borrowers together with credit counselors and lenders to quickly reach workable solutions to mortgage payment problems.