Mortgage relief program questioned

WASHINGTON, March 4 (UPI) -- Washington Mutual Vice Chairman Bill Longbrake said a U.S. government program designed to help borrowers could put some of them further in debt.

Discussing the U.S. Treasury Department's program Hope Now, initiated by the government and key banks, Longbrake said some homeowners could end up taking on a loan to catch them up on delinquent mortgages, ultimately pushing them further in debt.

The program is designed to forestall foreclosures by providing time for banks and borrowers to renegotiate the terms of a loan. But relatively few borrowers will find the process leads to a reduction in principal, Longbrake told The Washington Post.

"A mortgage servicer's obligation is to get the maximum value to the investor over the life of the loan," Longbrake said.

Longbrake, a senior policy adviser for the Financial Services Roundtable, is responsible for monitoring the program, the newspaper reported Tuesday.

The Treasury Department has said Hope Now has helped 45,000 homeowners find some form of relief. Faith Schwartz, executive director of Hope Now, said late fees, which accrue during delinquency, can sometimes by forgiven. And while the form of relief may vary, "for subprime borrowers, affordability is the real driver," she told the Post.