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There's evidence that efforts to slow foreclosures in the troubled housing market may be working. Since January, more than one million homeowners have worked out new plans to help avoid foreclosure. That's according to an alliance of mortgage lenders offering relief.

The group, called Hope Now, includes giants like Countrywide and Citigroup. It was organized by the administration to help struggling homeowners. Critics argue that the voluntary plan isn't doing enough. NPR's John Ydstie reports.

JOHN YDSTIE: Hope Now officials touted the new data, saying that it showed three times as many homeowners are getting loan adjustments as are being forced to sell their homes in foreclosure. But critics, including Bruce Marks of the Neighborhood Assistance Corporation of America, or NACA, says most of these loan adjustments are just Band-Aids.

In fact, about three-quarters of the adjustments make no change in the interest rate, amount or length of the loan. In the worst cases, Marks says, they just allow delinquent borrowers time to catch up, and could actually raise monthly payments.

Mr. BRUCE MARKS (Neighborhood Assistance Corporation): The vast majority of those quote/unquote "solutions" is no real solution. The inevitable result's going to be foreclosure, because they're not changing the underlying mortgage, which says this mortgage is structured to fail. It's unaffordable.

YDSTIE: Bruce Marks suggests a different approach: reducing the interest rate on these loans to make them affordable. His organization, which works with low-income borrowers, is doing just that under an agreement it negotiated with Countrywide. NACA is refinancing loans and cutting rates by as much as 5 percent so borrowers can stay in their homes.

NACA's approach is just one of a number of alternatives being put forward by skeptics who don't think the administration's voluntary Hope Now Alliance is an adequate answer to the mortgage crisis.

Mr. MARK ZANDI (Economist, MoodysEconomy.com): I think we're getting to the point where we might have to become much bolder in what we do.

That's Mark Zandi of MoodysEconomy.com. Though he's a private economist, Zandi has been shopping a plan around Washington that he believes could avoid massive foreclosures and stabilize the housing market. Zandi envisions the government buying huge numbers of troubled mortgages and re-financing them at lower rates. Under his plan, lenders would compete in an auction to sell their mortgages to the government at a discount.

For instance, the government might pay just $150,000 dollars for a mortgage that was worth $200,000 originally. The government would then refinance the mortgage at a lower level, making it more affordable for the homeowner, says Zandi.

Mr. ZANDI: But I wouldn't let the borrower off the hook. The $50,000 difference I would also put into a second loan, second lien. And if house prices ever were to rise and the homeowner were able to sell for more that 150k, they would share those proceeds with the government.

YDSTIE: In the end, this might cost taxpayers $100 billion, says Zandi, but it would be worth it to reduce the suffering of desperate homeowners, stabilize the housing market and get the economy back on track.

Senate Banking Committee Chairman Chris Dodd of Connecticut and former Federal Reserve Board Vice Chairman Alan Blinder have similar proposals of their own. The Treasury undersecretary for domestic finance, Robert Steel, says it sounds too much like a bailout.

Mr. ROBERT STEEL (Treasury Undersecretary for Domestic Finance): There are people that bought multiple condominiums in Las Vegas with two percent down, and we basically don't view that as an issue of public policy. We're not interested in bailing out investors or speculators. And a lot of these suggestions that people are making have that unintended and very unattractive consequence.

YDSTIE: President Bush and Treasury Secretary Paulson both agree.

Mark Zandi argues it wouldn't be hard to identify most speculators, because mortgage servicers already know which mortgages are held by investors.

There are other ideas floating around Washington, too. Some banks want to extend government insurance to thousands more troubled loans.

Today in Orlando, Florida, Federal Reserve Chairman Ben Bernanke told an audience of bankers that more needs to be done. He suggested that given the fall in home prices, principal reductions that restore equity in homes might be a more effective means of avoiding foreclosures than interest rate reductions.

John Ydstie, NPR News, Washington.

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