US mayors, mortgage lenders to set up hotline for sub-prime crisis-hit
29 November 2007

Mumbai: The explosion of failed mortgages has led to a national foreclosure crisis, and lenders who are facing the heat from the public and the US Congress have promised mayors in Detroit that they will pay for credit counselling hotlines and assemble a database to help understand who owns foreclosed properties.

The US conference of US Congress that help people with their loans met at the MGM Grand Detroit hotel to brainstorm on how to reduce the number of people losing their homes.

The Mortgage Bankers Association has said it will donate $100 for every property in foreclosure - there are an estimated 1 million properties facing foreclosure - to hotlines designed to help people avoid foreclosure.

The association has also launched a database of all the loans in foreclosure, accessible on its website. It will allow people to find out which lender is responsible for a foreclosed house and who is servicing the loan on the house.

The association also said it would make its studio in Washington available to mayors to film a public service announcement about foreclosures. An association representative said the steps are being taken to help address the need created by some in the industry.

The database would prove useful because residents inundate city halls with complaints about foreclosed homes with overgrown lawns and broken windows. But it is difficult to find out who is responsible for the property.

It's also difficult to determine which entity has seized a house when it is foreclosed - a bank for a mortgage or a government for taxes. Also, the demand for counselling help is enormous.

After being told by non-profit organisations that 72 per cent of those in foreclosure actually have the wherewithal to remain in their homes if given proper help, the mayors said it's essential to convince people nearing or in foreclosure to seek help.

Three-quarters of those in foreclosure are not deadbeats, but caught in poorly designed loans - part of the sub-prime market where loans began with cheap initial interest rates that later ballooned to unaffordable levels.

Earlier this month, RealtyTrac reported 1 in 33 homes in metro Detroit was subject to a foreclosure filing - second in the nation behind Stockton, California. The conference said a concerted effort by a national team of mayors could put considerable heat on the national lending industry.

General reports on Finance