New subprime plan reaches beyond Treasury's: ACORN

[Andrew]

NEW YORK (Reuters) - A top community group and Countrywide Financial Corp. (CFC.N: Quote, Profile, Research) next week will announce an agreement that helps prevent foreclosure for homeowners already in default, filling gaps in a federally supported plan.

The initiative is a step beyond the plan engineered by industry groups last month that would freeze interest rates for borrowers in danger of default, the Association of Community Organizations for Reform Now, or ACORN, said in a statement. Critics of the measure announced by President George W. Bush claimed it would help only a fraction of troubled borrowers since it would lock out homeowners already in arrears.

The agreement "substantially raises the floor of foreclosure prevention standards recently established by the HOPE NOW plan" supported by the Bush administration, ACORN said in the statement.

Executives from Countrywide and ACORN will detail the plan on January 17, ACORN said in the statement. A teleconference was originally scheduled for Thursday but was delayed.

Treasury officials estimated the HOPE NOW plan, developed by industry and community groups, could help 1.2 million borrowers keep their homes. An analysis by UBS Securities estimated that the plan would help 340,000 homeowners, or about a quarter whose interest rates are slated to rise by mid-2010.

Subprime delinquencies soared in 2007, creating losses to lenders and investors who financed loose underwritings to risky borrowers. Lenders and investors have been steadily tightening lending standards, exacerbating a credit crunch that analysts fear may tip the U.S. economy into recession.

At Countrywide, foreclosures and mortgage delinquencies in December rose to record levels. Shares of the Calabasas, California-based company on Wednesday fell to their lowest in nearly 13 years after it announced monthly operating results and on speculation it may have to seek bankruptcy protection.

By easing loan terms, lenders hope to reduce losses to themselves and mortgage bond investors from foreclosures in a weakening housing market. The pace of loan modifications has been slow, with just 3.5 percent of mortgages whose rates were slated to rise in the first eight months of 2007 being altered by September, according to Moody's Investors Service.

(Reporting by Al Yoon, Editing by Chizu Nomiyama)

[Moe Bedard]

Yeah, we'll see what this plan says. The last deal they did with NACA was weak. Hopefully Acorn gets better terms to help people.