White House Acts To Aid Hurting Homeowners

The Obama administration on Wednesday named the first six companies participating in a $75 billion program designed to help millions of struggling homeowners avoid foreclosure.

The administration said the companies - including some of the mortgage industry's biggest players - will receive a maximum of $9.9 billion in incentive payments, which are designed to encourage mortgage companies to lower borrowers' monthly bills. The government expects to finish arrangements with other companies in the coming months.

Chase Home Finance, part of JPMorgan Chase & Co., will receive up to $3.6 billion, the largest amount among the six companies.

The other recipients are: Wells Fargo & Co., GMAC Mortgage Inc., Citigroup Inc.'s CitiMortgage unit, Select Portfolio Servicing and Saxon Mortgage Services Inc.

The program, unveiled on March 4, will offer struggling homeowners the chance to obtained modified loans with lower monthly payments. It's being funded by $50 billion out of the government's $700 billion financial rescue program. The remaining $25 billion will come from other government sources.

CBS News correspondent Anthony Mason reports nearly 370,000 homes have been repossessed already this year. As the foreclosure rate hit another all time high last month, the biggest surge, according to foreclosures.com, came in the Southwest, up 52 percent. In the Midwest, foreclosures soared 48 percent, and they also rose sharply in the Southeast, 35 percent, and the Northeast at 18 percent.

The main reason for the jump is that many of the major mortgage companies have recently lifted moratoriums on repossessions. Explains foreclosures.com's Alexis McGee, "That has caused a lot of lenders that had a backlog of homes that were in the process of foreclosure to go ahead and complete them."

Mason reports the president's mortgage relief plan should help many borrowers. But soaring unemployment is prolonging the problem. Jim Carr of the National Community Reinvestment Coalition says the 2 million jobs lost just this year "translates into a potential 800,000 new foreclosures. And so this crisis is nowhere near done. It's not over."

The refinancing plan is limited to borrowers who owe up to 5 percent more than their home's current value. The administration has estimated the program could help 9 million struggling homeowners avoid foreclosure.

Housing and Urban Development Secretary Shaun Donovan said in an interview Wednesday that mortgage companies "weren't waiting to sign the contracts to get going." The banks, he said, "have already taken hundreds of thousands of applications for refinances and modifications."

Still, many borrowers and consumer groups claim the modifications offered by the lending industry to date don't do enough to help cash-strapped homeowners, despite more than a year of public prodding from regulators.

Fewer than half of loan modifications made at the end of last year actually reduced borrowers' payments by more than 10 percent, data released last month show.

Questions remain about whether the lending industry has ramped up its staff and technology to handle an unprecedented wave of defaults and foreclosures.