HOPE NOW: Deal or No Deal?

Today's MBA Newslink featured a story titled HOPE NOW Enlists Celebrities to Target At-Risk Homeowners. The story describes how this new program, called Bringing Hope Home, is intended to raise awareness of HOPE NOW by featuring celebrities such as Queen Latifah, Wyclef Jean and NYC radio personality Angie Martinez in educational videos, radio spots and direct mail campaigns which will encourage distressed homeowners to contact their loan servicer and seek foreclosure prevention counseling.

While I salute the effort - anything that can help a homeowner avoid foreclosure is worth trying - it strikes me that they've picked the wrong celebrities. We really should be seeing Howie Mandel, or, for older homeowners, Monte Hall and Bob Barker. In fact, maybe HOPE NOW should consider putting someone like Howie, Monty or Bob in charge of the entire loan modification program, because they have a much better track record of making a deal work out.

HOPE NOW claims to have prevented 2.2 million foreclosures between July 2007 and November 2008, and to have modified 950,000 loans during that period. Unfortunately, according to the U.S. Comptroller's Office, some 53% of borrowers with loans modified in the first three months of 2008 and 51% of those with loans modified in the second quarter could not keep up with payments within six months. And, as anyone familiar with RealtyTrac U.S. Foreclosure Report already knows, foreclosure activity spiked by 81% from 2007 to 2008, when over 2.4 million households received at least one foreclosure notice. Obviously, the loan modifications, loan workouts and other deals being made with at-risk borrowers aren't working as planned. In fact, many borrowers complain that their monthly payments have actually gone UP after the loan modification process, which defies all logic, but is perfectly in synch with the level of dysfunction in the financial markets today. Other borrowers complain that they've tried desperately to reach their loan servicer to discuss short sale offers or re-work loan terms only to give up in frustration after either not being able to get in touch with anyone, or having their pleas fall on deaf ears.

Using celebrities to generate awareness and stimulate participation in the program is a good idea. But getting the deals right - modifying loans in a way that makes the monthly payments affordable and the principle balances more in line with current market prices - is what HOPE NOW member organizations really need to focus on if the initiative is going to succeed. Getting the deals right mean keeping borrowers in homes, keeping distressed properties out of inventory, and helping the financial industries clean up their balance sheets. Bad deals result in more foreclosures, more carnage in the real estate market and more of the economic devastation we're currently wading through.

I'll trade Queen Latifah for the loan restructuring program behind door number two, Monty. Deal, or no deal?