Plan will aid those facing loss of homes

A panel convened by Massachusetts banking regulators is recommending the state provide refinancing and other financial assistance to borrowers facing foreclosure.

These were the most dramatic options offered by the Mortgage Summit Working Group, a panel of 50 Massachusetts lenders, community activists, and regulators that today is expected to release wide-ranging recommendations to help the growing number of borrowers facing foreclosure on their homes.

The group did not put a dollar amount on the aid that should be extended to troubled borrowers, but it did suggest the financing come from a combination of sources: banks, mortgage companies that specialize in subprime loans, and state funds.

Steven Antonakes, Massachusetts commissioner of banks, said the goal of the proposals is to move troubled borrowers into more affordable mortgages.

Summit members said the state's solutions for borrowers would not be confined to outright refinancings of delinquent mortgages, which would be extremely expensive.

In addition to refinancings, the state could offer smaller sums for borrowers to pay down a portion of their debt, so they would be in a better position to negotiate more favorable terms with a lender.

One approach suggested by the group would offer delinquent borrowers 40-year mortgages that would have a low interest rate, perhaps 5 percent, in the first 10 years, rising in subsequent years. The lower rate could be subsidized or somehow backed by the state, and the lower monthly payments would make the loans easier to afford. However, a 40-year mortgage can make the total borrowing cost higher over the life of the loan.

In 2006, there were a record 19,487 foreclosure filings against homeowners, with 2007 on track to exceed that number, according to ForeclosuresMass.com.

The vast majority of these homeowners had subprime loans, which carry higher interest rates and are often targeted at borrowers with poor credit or large debts. The typical subprime loan carried a low teaser rate. But borrowers then saw their monthly payments jump often by hundreds of dollars after the introductory period.

The panel also suggested delinquent borrowers be given help to negotiate loan workouts with lenders, and it asked that lenders give customers more time or lower interest rates to help prevent foreclosure. State regulators do not have any authority under state law to force such actions , but panel members argued it is in lenders' financial interest to help homeowners renegotiate their loans rather than to seize so many homes.

Other recommendations include greater regulation of the lending industry, such as increasing licensing requirements for mortgage companies, boosting the state's audit staff, and raising state fees charged to registered lenders.

Mortgages now in default, Antonakes said, "began with a broker and ended with a Wall Street investor [and] encouraged some brokers to engage in weak underwriting if not outright fraud, and this has to end."

Several bills have been introduced in the Legislature to address the crisis, though lawmakers have not acted on them in the two weeks since hearings on the subject were held in late March.

But with about 75 homeowners receiving foreclosure notices each day in Massachusetts, some community activists urged the state government to move more quickly to help troubled borrowers now.

"This idea that we do reports and discuss things is just an insult to all the people who have been victimized who are being foreclosed," said housing activist Bruce Marks, head of the Neighborhood Assistance Corp. of America, which finances home purchases and is being inundated with requests for refinancing by subprime borrowers with high-cost mortgages.

Kimberly Blanton can be reached at blanton@globe.com.