Lenders say foreclosure moratorium no solution

A foreclosed home is shown in Corona, California, December 18, 2008.

WASHINGTON (Reuters) - Private mortgage lenders warned on Monday the number of U.S. homeowners seeking help to avoid foreclosure would double next year, but said a moratorium on house evictions was not a good idea.

Hope Now, an industry alliance trying to keep homeowners in their homes after the collapse of the country's housing market, said mortgage modifications aimed at preventing foreclosures would climb to around 2 million in 2009.

Foreclosures are at an all-time high and are expected to rise as a year-long U.S. recession pushes up unemployment.

U.S. lawmakers have called for a moratorium on home foreclosures and some states have unilaterally imposed a halt, but industry leaders said this just postpones the inevitable.

"Ultimately, you have to face realities ... there are some situations that cannot be resolved," John Courson, chief operating officer of the Mortgage Bankers Association, told a Hope Now conference call to discuss the year ahead. "An outright ban is not a permanent solution."

Hope Now estimates that its efforts have helped prevent 2.2 million foreclosures in the first 11 months of 2008, but any mortgage restructuring depends on the homeowner's ability to at least pay something toward the loan.

"If someone doesn't have any income, they cannot keep their home. This is a mortgage, not a gift," Steve Bartlett, president and chief executive officer of the Financial Services Roundtable, said on the conference call.

U.S. bank regulators said earlier on Monday that the number of borrowers re-defaulting on modified mortgages was rising.

Bartlett said this was generally not because the modification was done poorly, or was not designed to be permanent, rather borrowers get into additional difficulties.

"Homeowners' circumstances change after they modify the mortgage ... they lose income or lose their jobs," he said.

In a nod to the desperation felt by many Americans worried about losing their homes, Colleen Hernandez, president and executive director of the Homeownership Preservation Foundation, warned of an explosion in con artists preying on borrowers who have fallen behind on their loans.

She described them during the conference call as "companies that make big promises, take high fees and deliver nothing" to help a struggling homeowner keep up with mortgage payments.

But there were several good ways to spot a rip-off in advance, Hernandez noted.

"Are they calling you or are you calling them? Do they want money for their services? Do they want you to hurry up and sign something that you don't understand?" she added.

(Reporting by Alister Bull; Editing by Gary Crosse)