WCVB: The Home Saver program’s goal is to refinance subprime borrowers to fixed rate loans. Why have so few borrowers qualified?

MassHousing: The primary goal of the Home Saver program is to keep people with sub-prime loans in their homes whenever possible.

To accomplish the goal, we have enlisted the capabilities of the national Home Ownership Preservation Foundation and more than 20 Massachusetts counseling agencies. They all work to tailor individual solutions that will hopefully allow the owners to remain in their homes.

One option may be refinancing through MassHousing if the homeowners are able to afford a new mortgage and can otherwise meet the qualifying criteria. However many homeowners are helped in other ways and therefore never reach the point of applying for a MassHousing refinance loan.

Through the counseling process, it is often determined that refinancing is not a viable option. Unfortunately, as has been well documented (including in remarks made yesterday by U.S. Treasury Secretary Henry Paulson), home prices have dropped dramatically and many people owe far more than their home is worth.

That phenomenon combined with low credit scores means that many people simply cannot qualify for even the most generous refinancing programs such as Home Saver.

Additionally, many people used inappropriate loans to buy homes they could never afford to begin with, and thus to try to remedy their situation by giving them another loan is difficult if not impossible.

WCVB: Did the state not anticipate that most borrowers would not qualify?

MassHousing: Last year, MassHousing moved swiftly to implement the most comprehensive state refinancing program in the nation for distressed homeowners, even before the full scope of the foreclosure crisis emerged.

The product is notably generous in that it provides financing for up to 105% of the home's currently assessed value, accepts credit scores as low as 560 and a borrower can be delinquent for up to 60 days on their existing loan.

We hoped to help as many people as possible but we never assumed the program would solve the problem completely. We understood that it would only be one of many foreclosure prevention measures put forth by the public sector.

As time has gone on, the scale of the foreclosure crisis has far exceeded any forecast made by the public and private sectors. The continuing decline in property values had made this problem even worse.

Nonetheless, in a recent study, the Pew Charitable Trust ranked Massachusetts's response to the foreclosure crisis (including the Home Saver program) -- along with those of Ohio and Minnesota - as the most comprehensive in the nation.

WCVB: Why has there been so little cooperation from lenders with regard to lower interest rates and accepting partial repayments?

MassHousing: Please note that the interaction with lenders associated with MassHousing's Home Saver program is not the only interaction with lenders conducted by the state. The Office of Consumer Affairs through the Division of banks has tirelessly worked to address the issue of unresponsive lenders.

Feedback that we have received from many sources indicates that lenders are more willing to go through the foreclosure process than to engage in workouts involving substantial loan write-downs.

Some have suggested that lenders are unwilling to accept the liability for possible legal action that could be taken by investors who might not agree with loan workouts structured by the lenders, and thus foreclosure becomes a simpler option.

Home Saver is designed so that local nonprofit counseling agencies work directly with the troubled homeowner to advocate for loan solutions with lenders and servicers.

The counseling agencies that have partnered with MassHousing have more experience in counseling troubled homeowners and negotiating with lenders.

WCVB: What other services does the program offer (beyond refinanced loans) that are helpful to consumers?

MassHousing: As mentioned earlier, Home Saver provides free, comprehensive homeowner counseling through the nationally recognized Hope Hotline 1-888-995-4673, along with well-established local non-profit counseling agencies whose sole mission is to assist troubled homeowners.

Assistance includes a thorough review of a homeowner's financial situation, their loan documents, and referrals to other counseling entities such as credit counseling as needed. If it is determined that a borrower might qualify for a refinancing loan, they are encouraged to apply for a loan from MassHousing.

Since July 2007, when the Home Saver program was announced (note that the program was not fully implemented until September 2007) through May 2008, 29,449 MA residents called the Hope Hotline for assistance. Of those, 7,561 completed counseling, most of whom entered into negotiations with their existing lender with the assistance of the counseling agencies.

Of those borrowers determined by the counseling agency to be eligible for our loan program, fewer than 50 were denied, most of which were for inadequate property value. This is important to note because it clearly demonstrates that Home Saver is more than just a refinancing product. The number of people who have been helped far exceeds the number of refinancing loans closed.