Borrowers may benefit from mortgage relief plans
By Marcie Geffner • Bankrate.com

If you're a homeowner sitting with an adjustable rate mortgage that is about to reset to a much higher rate, what should you do? For now, wait to see what help the government will bring.

A plan to freeze interest rates for some of the nation's homeowners with soon-to-adjust ARMs is in the works, and details are expected to be announced today by President Bush. Treasury Secretary Henry M. Paulson Jr. is also expected to hold a news conference on the subject this afternoon.

Earlier this week, Paulson presented a plan that he said would avoid "preventable foreclosures" and minimize the impact of the housing market downturn on the U.S. economy.

His proposal might help some homeowners who:

• have a steady income
• a relatively clean payment history.
• could afford the lower introductory rate on their mortgage, but not the higher adjusted rate.

"This is a positive step, but the devil is in the details," said Sharon Reuss, a spokeswoman for the Center for Responsible Lending, a nonprofit research and policy organization that combats abusive financial practices and is funded by a consortium of public-interest nonprofit foundations.

Paulson's plan, which he outlined in a speech at a housing forum organized by the federal Office of Thrift Supervision, would expand lenders' and servicers' efforts to contact homeowners who aren't able to manage their mortgage payments, beef up funding for credit counseling agencies, and develop standard categories that lenders and servicers would use to determine which borrowers were eligible for loan modifications and refinancings.

Hotline for help
A key component is an existing hotline that homeowners can call for assistance.

"And let me say to those listening out there: If you are worried about losing your home, call this number, 888-995-HOPE, to see if you are eligible for assistance," the secretary said.

The hotline is operated by the Homeownership Preservation Foundation, a Minneapolis-based nonprofit organization that helps homeowners avoid foreclosure and is funded by a network of major lenders. Help is available 24 hours a day in English and Spanish.

The foundation's counselors, who've been credentialed by the U.S. Department of Housing and Urban Development, answered more than 30,000 calls and provided mortgage counseling to more than 15,000 people in the second quarter of 2007, according to a statement from the organization.

Who may get help
The Treasury secretary didn't mention another plan he reportedly discussed with a small group of lenders and servicers that would freeze introductory interest rates on subprime adjustable-rate mortgages. News reports have suggested the lower rates might be frozen for as long as seven years in some cases, but no details have been announced.