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Blindsided by the number of loans that have already gone bad, top mortgage lenders - according to a WSJ report - have reached a major agreement on new guidelines to improve and speed up the industry’s voluntary efforts to help struggling homeowners.

While lax lending policies have been blamed for the ongoing home-mortgage crisis across the country, the distress has been exacerbated by fundamental problems with the economy, primarily - as result of the housing meltdown.

The agreement among the firms in the Treasury Department-backed Hope Now alliance, which is scheduled to be announced Tuesday, comes as U.S. Senate lawmakers prepare to begin debate this week on a massive housing package aimed at slowing the record pace of foreclosures that continues to roil the economy. That legislation, which includes a program to refinance up to $300 billion in troubled mortgages, could be voted on by the Senate this week, sources said.

The Hope Now agreement will have lenders and servicers take a uniform approach when dealing with homeowners, including setting a specific timeline for them to respond to borrowers seeking to avoid foreclosure.

Borrowers seeking help should receive an acknowledgment of their request within five business days once received by the lender, the agreement says, and would in most cases receive a final decision on whether they will receive help with their loan within 45 days.

Lenders and servicers have also agreed to other steps, including the automatic subordination of second liens in certain circumstances, suggesting that a second lien holder should re-subordinate their loans to allow refinancing or a loan modification under certain conditions.

In addition to forbearance, repayment plans and loan modifications — including a writedown on a loan’s principle — the agreement directs lenders to accept a deed in lieu of foreclosure or a short sale instead of completing the foreclosure process.

In other words, the agreement calls on servicers to delay foreclosure proceedings that are about to begin, or have already begun, when there is a possibility that other steps could allow a homeowner to remain in their residence.

Hope Now claims its efforts have resulted in nearly 1.6 million loan workouts since July 2007. These numbers however, are met with skepticism from regulators.

Source: New Lender Guidelines To Help Struggling Homeowners