(From the Wall Street Journal)

By MICHAEL R. CRITTENDEN
June 17, 2008; Page A3

WASHINGTON — Top mortgage lenders and servicers have agreed to speed up their efforts to help struggling homeowners, after coming under pressure from U.S. lawmakers and regulators.

The agreement among companies in the Hope Now coalition says for the first time that lenders should accommodate borrowers seeking to sell their home for less than their mortgage balance as a way of avoiding foreclosure.

The coalition, which is backed by the Bush administration, says its efforts since July have resulted in nearly 1.6 million loan workouts. Those numbers have been met with skepticism from legislators who say the mortgage industry should be trying harder to help people at risk of losing their homes.

Under the agreement, to be announced Tuesday, borrowers seeking help should receive an acknowledgment within five business days. In most cases, they should receive a final decision on whether they will receive help with their loan within 45 days. Lenders also will pledge to stay in touch with borrowers while reviewing their loans.

The agreement isn’t legally binding.

Claims from other lenders, known as secondary liens, often have delayed refinancing or loan modifications because the secondary lenders are often the first to take a hit when a borrower gets easier repayment terms. The new Hope Now agreement automatically keeps the second-lien holders at the back of the line, in some circumstances.

In earlier discussions, the Hope Now parties agreed that lenders should consider a new repayment plan and changes to the terms of a loan — including writing down the loan’s principal — before foreclosing on a home.

The latest agreement says lenders should also accommodate “short sales,” in which the borrower sells the home at a fair market value that is below the outstanding balance on the mortgage. The lender essentially forgives the difference between the sale proceeds and the balance.

While both short sales and foreclosures result in borrowers leaving their homes, a short sale allows homeowners to move out in a more orderly fashion, and their credit scores generally suffer less.

The agreement calls on servicers to delay foreclosure proceedings that are about to begin when there are still other steps that could allow borrowers to keep their homes.

Hope Now participants — including major banks and companies that service loans by collecting monthly payments — are expected to implement the new standards within 60 days.