Freddie Mac plans to buy $20 billion worth of subprime mortgages to keep the pump primed for borrowers with poor credit histories.

EMC Mortgage Corp., a subsidiary of the Bear Stearns Companies has deployed a 50-person "Mod Squad" to reach out and help financially-strained borrowers modify mortgages and hopefully avoid foreclosure.

The nation's largest savings and loan, Washington Mutual Inc., plans to refinance up to $2 billion in subprime mortgages to help borrowers avoid default and foreclosure.

The wagons are circling.

The cavalry is mounting up.

With a pre-national election-year Congress hunkered down in Fort Washington, mulling over the fate of millions of home owners struggling with unaffordable mortgages, a flurry of action in the private sector is leading the charge to bail them out.

The efforts send a strong signal to suffering home owners to seek refuge from lenders rather than waiting for legislative relief and instead of taking a head-in-the-sand approach to saving their home.

The growing mortgage relief effort is not unlike those following California wildfires, Hurricane Katrina, and the World Trade Center bombing.

Only this time, instead of hundreds or thousands of homes damaged, destroyed or at risk, it's a national disaster affecting millions of home owners, and perhaps the economy at large.

The cause?

A buffet line of risky mortgages served up with the same effect as feeding diabetics a steady diet of high-fructose corn syrup-laden junk food.

Subprime loans are generally more expensive than prime loans, but they are granted to some borrowers who pose a greater risk to lenders, typically because of their lack of credit or previous credit problems.

The risky loans were sugar coated as an opportunity to achieve the American Dream for those who otherwise may have been left with bland rental homes. Some home owners managed to refinance, wean themselves from the loans and keep their homes. Others were left with only the bitter taste of losing their home after they discovered they couldn't stomach the cost.

As a side dish, to help make high housing costs more palatable, lenders also offered an appetizing array of also risky nontraditional loans.

After the sugar-high of the mortgage world fades, an estimated 2.2 million households will likely hurl home ownership, according to the Center for Responsible Lending's "Losing Ground: Foreclosures in the Subprime Market and Their Cost to Homeowners".

Experts say, along with foreclosures, fallout from lost homes includes failed lending businesses, lost jobs, stricter lending rules, a depressed rate of home ownership and broken communities. Some expect further economic gloom due to the business of risky loans.

As federal legislators wrangle over the best course of action, federal banking regulators recently issued a "Statement on Working with Mortgage Borrowers" encouraging lenders to stand up for their customers unable to make mortgage payments.

"Prudent workout arrangements that are consistent with safe and sound lending practices are generally in the long-term best interest of both the financial institution and the borrower," according to the statement.

Lenders are putting a face on long-held advice for struggling homeowners -- contact lenders at the first sign of trouble. Lenders aren't in the business of taking back homes and would rather see consumers work through hardships and retain home ownership.

The statement, collectively issued by the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision, also offered "favorable Community Reinvestment Act (CRA) consideration" for lenders who helped low and moderate income home owners make a transition from higher cost loans to sound lower cost mortgages.

Federal regulators also suggested lenders work in conjunction with organizations like NeighborWorks' Center for Foreclosure Solutions to add counseling to any financial assistance.

The U.S. Department of Housing and Urban Development (HUD) also maintains a list of approved counselors, the statement reminded.

Mortgage relief is also available for military personnel under the Servicemembers Civil Relief Act (SCRA). It prohibits the sale, foreclosure, or seizure of service member property secured by the mortgage during the period of military service, or within 90 days thereafter.

The feds concede SCRA requirements apply only to obligations that were originated prior to the service member’s military service, but federal agencies also encouraged institutions to work with service members and their families who are unable to meet any of their contractual mortgage obligations.

Published: April 20, 2007

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.