Paulson announces coalition to help homeowners

By Patrick Rucker

WASHINGTON (Reuters) - Treasury Secretary Henry Paulson on Wednesday announced that a coalition of mortgage service companies, counselors and trade organizations was banding together to offer help to hard-pressed homeowners.

"Eleven of the largest mortgage servicers representing 60 percent of the mortgages in America, several of the leading mortgage counselors, investors and large trade organizations have come together and formed a partnership to help more Americans keep their homes," Paulson said at a news conference announcing the initiative known as HOPE NOW.

Among the mortgage lenders and servicers who pledged to offer flexible terms to borrowers in trouble were Countrywide Financial Corp. CFC.N, Wells Fargo & Co. (WFC.N) , CitiMortgage Inc. (C.N), HSBC (HSBA.L) and JP Morgan Chase

(JPM.N).

Paulson noted the combination of falling home prices, low down payment mortgages and adjustable-rate mortgages resetting at higher rates was "creating real challenges" for homeowners who need help in finding ways to avoid foreclosure.

A chief goal of HOPE NOW is to contact troubled borrowers before they become so delinquent in their payments that foreclosure is almost unavoidable, said Michael Heid, co-president of Wells Fargo Home Mortgage.

But paying for new mortgage counselors and launching an effective public awareness campaign will require fresh funds, he said.

"The speed with which these monies are secured will largely dictate the speed with which we can ramp up the program and help more homeowners," Heid said at the Wednesday event.

Paulson offered no federal money to jump start the HOPE NOW program and explained the initiative would largely be overseen by the private sector.

The Department of Housing and Urban Development will partner in the program and during Wednesday's program HUD Secretary Alphonso Jackson said: "I do need some more money."

Senator Charles Schumer, Democrat of New York, has won $200 million of new foreclosure prevention funding in an HUD spending bill that has yet to be ratified by the U.S. House of Representatives.

In one concrete proposal of HOPE NOW, a major investor association said its members were willing to waive foreclosure prevention counseling costs if it would help a borrower save his home.

The American Securitization Forum, which represents many mortgage investors, said in a statement that "borrower counseling fees should be reimbursable" if such an action would help preserve the loan.

FANNIE, FREDDIE ROLE

Political allies of mortgage finance companies Fannie Mae (FNM.N) and Freddie Mac (FRE.N) have argued that they should be permitted to buy more troubled home loans and so help stabilize the mortgage market. Currently, the two companies are under orders from their regulator to freeze their investment holdings near their present level of around $1.4 trillion.