Hope Now Alliance

One of the efforts undertaken by the federal government following the subprime mortgage meltdown

What is the Hope Now Alliance?

The Hope Now Alliance is a united front formed in 2007 in response to the U.S. subprime financial crisis to remedy the surge in foreclosures. It was brokered as an alliance of U.S. government officials, mortgage lenders, counselors, investors in mortgage-backed securities, and other market participants.

 

Hope Now Alliance

 

The alliance is a public-private partnership formed at former President George W. Bush’s request. It aims to develop a unified and coordinated plan to reach out to distressed homeowners, keep them in their homes, and create a common approach to reach out to as many homeowners as possible.

 

Summary

  • The Hope Now Alliance is one of the federal government’s efforts undertaken following the subprime mortgage meltdown to maximize outreach efforts to distressed homeowners and address the crisis’ impact on the mortgage loan market.
  • The alliance operates a 24/7 toll-free hotline called Homeowner’s Hope Hotline that readily provides counseling to homeowners who want to avoid the risk of foreclosure.
  • Despite its efforts to help homeowners in distress, the Hope Now Alliance also received a fair share of criticisms that it only benefits lenders by aiding the less risky borrowers.

 

How the Hope Now Alliance Works

Functionally, the Hope Now Alliance’s membership is dedicated to diagnosing consumer confusion and to repair mortgage market practices. The group promotes Homeowner’s Hope Hotline, a 24-hour toll-free telephone number that offers free counseling to homeowners seeking to steer clear of foreclosure. At its onset in 2007, the Hope Now Alliance addressed the increased foreclosure problems across the country.

During the subprime mortgage crisis, many homeowners were on the brink of losing their homes to offset outstanding mortgage loans. The group’s operational structure is designed to manage the widespread predatory mortgage lending practices by offering help in the form of modified loans and counseling. Thus, the Hope Now Alliance’s efforts to reverse the overwhelming trend of foreclosures were primarily based on contacting homeowners for workouts and loan modifications.

Workouts, in such a case, means repayment plans that only let borrowers catch up on late payments and not offer them relief. The alliance also reaches homeowners through events and mailings.

 

Recommendation for Financial Market Regulations

After the turmoil in the credit market subsided, the Hope Now Alliance broadened its scope from exclusively helping homeowners refinance mortgage loans with ease to championing for higher lending standards and a code of ethics among lenders. Particularly, the alliance advocated for the establishment of risk standards and modification of loan disclosure requirements for homeowners.

Other federal government programs also came forth with legislative changes with respect to the systemic risks of mortgage loans. For example, the Housing and Economic Recovery Act was passed in 2008 and was intended to provide relief to troubled homeowners. Other programs that came to life due to the subprime mortgage market include the FDIC’s Mod in a Box and Emergency Economic Stabilization Act of 2008.

The idea was to stabilize the mortgage market by adopting practices that would ensure both lenders and borrowers engage in low risk spread in the underlying mortgage. The Hope Now Alliance, through the Homeownership Preservation, is currently providing online education to borrowers, thanks to the 2014 partnership deal between the HPF and Framework. Prospective homebuyers can now enhance their knowledge of the online purchase process for successful and sustainable homeownership.

 

Criticisms Against Hope Now Alliance

The Hope Now Alliance was formed as a response unit following the free-fall economy due to the subprime mortgage property crisis. According to the Hope Now Alliance, as of September 2009, it already helped at least 1.7 million borrowers at the risk of foreclosure. At the same time, the alliance claimed that as of 2014 alone, it already resolved more than two million cases.

However, critics argued that the actual number of borrowers, based on the precise definition of a borrower, did not lose their homes and were in the position to get a subsequent mortgage. It is further argued that the Hope Now Alliance did little to help distressed homeowners and that the coordination of its assistance plan was below par, leaving most borrowers more confused and on the brink of foreclosure.

Another criticism was that the union’s member firms were reluctant to support loan modifications that could lower the amount of money they were owed.

 

Special Consideration

The central criticism was that the Hope Now Alliance favored lenders over borrowers. For example, critics argued that the Hope Now Alliance focused on getting temporary mortgage repayment plans from lenders instead of championing for long-term relief for homeowners. It was despite the fact that the alliance established itself as a source of help to distressed homeowners.

However, the Hope Now Alliance now prides itself on helping more than 1.7 million homeowners from the abyss of foreclosure. The initiative is currently working closely with the U.S. Treasury, mortgage loan lenders, the Federal Housing Finance, Freddie Mac, Fannie Mae, and services on other mortgage relief programs, such as the Streamlined Modification Plan.

 

More Resources

CFI offers the Certified Banking & Credit Analyst (CBCA)™ certification program for those looking to take their careers to the next level. To keep learning and developing your knowledge base, please explore the additional relevant resources below:

  • 2008 Global Financial Crisis
  • Homeowners’ Association
  • Home Equity Loan
  • Predatory Lending