As the economy increasingly buckles beneath the pressures of mortgage delinquencies and foreclosures, a big question rises to the top: What to do about it?

Lenders say they're ramping up efforts to restructure problem loans, but federal officials are pressing the mortgage industry to do more. Worried borrowers complain of difficulties dealing with loan servicers.

In October, 27 servicing firms formed Hope Now, an industry group that teamed with nonprofit mortgage counselors to help more people stay in their homes. In a report released in February, the alliance said it helped 1,035,000 borrowers with repayment plans and new terms for their mortgages.

The group recently sponsored three sessions in California where more than 900 borrowers meet one-on-one with lenders and nonprofit counselors. As part of the California effort, Hope Now executive director Faith Schwartz, and John Robbins, the 2007 chairman of the Mortgage Bankers Association, visited The Bee to talk about helping troubled borrowers.

Q: Are you making progress? What seems most obvious is that foreclosures keep rising.

Schwartz: We're certainly making progress. There's no doubt about it. Actual foreclosures were 350,000 in the time period of our first report (July 2007 through January 2008) while over a million people got some kind of restructuring, a repayment plan or some kind of foreclosure avoidance plan. … I think we're going to be seeing continued trends in the right direction on this, but we're seeing increased delinquencies, so it's all relative.

Q: Many people complain about bailing out people with mortgage troubles. Are there some who shouldn't get help?

Robbins: Certainly, in my opinion, homeowners that bought a home for pure speculation, who said they were going to occupy it and never did. … I think once you move from ranks of homeowner to an investor the sophistication bar needs to go up quite a bit. I don't think that serves the public well to bail out people who are real estate speculators.

Schwartz: I think everyone has a chance to qualify for a workout if their situation is appropriate. But people who don't want to be in their houses, had no money down and are under water and don't have capacity or the willingness to pay are probably not going to get help. … The main emphasis is owner-occupied homes.

Q: Federal Reserve Chairman Ben Bernanke has joined those saying lenders need to do more to keep people in their homes. He suggested reducing the principal for some borrowers. What does the industry think?

Robbins: We've heard of negative-equity participation certificates and other vehicles being thought out. It's for the borrower who can afford to make the payment but can't refinance because their house is upside down. And so the difference between what their home is worth and what the mortgage is worth would create that negative-equity participation certificate.

… We have to be careful when all of a sudden we say we want to create negative amortization certificates or that we want to do foreclosure moratoriums. You just can't go back and negate contract law that's been developed over the last 30 years. … If you walk away from that language what have you done to American mortgage-backed securities in the future? They'll be nonexistent.

I mean, nobody in the world is going to invest in any of our assets if they feel the United States is just going to neutralize them when the risk is there. Either that, or the cost of those securities will skyrocket.

Q: We're hearing more about people walking away from the house because they owe so much more than it's worth. What would you advise them?

Schwartz: We're saying don't walk away from your house. I think there are all kinds of alternatives. There are workouts to keep people in houses. The cycles of markets come and go. I think absolutely people should not be walking away from their house.

Robbins: If you sign a contract, you make the payments. It's certainly the way that I was raised, and I had a house or two in the '90s that went upside down before it came back again. I still made my payments.

Historically, real estate prices, when they have gone down, in the '90s especially, they have ultimately bottomed, come back, and gone through their previous highs. If you want to build equity, hang with it.

… Part of me says the industry made a big mistake in the sense that it led an awful lot of people to play in the appreciation game with no poker chips on the table. What is their motivation to stay in the home if they have no financial investment? They didn't have to work hard to save a down payment.

It's easy to walk away. It's easier than it's ever been to walk away. Do you remember when we were growing up? Foreclosure was really a stigmatization. It really affected people their whole life. It's simply not the case anymore, and so it's easier probably to walk away than it's ever been. It's easier to restore your credit than it's ever been.

Q: People always tell us it's difficult to work with lenders when they call them. What's going on?

Robbins: Here's the problem. You can imagine what the total numbers of calls is like, when you're getting 5,000 calls a day or 10,000 calls or whatever the number is. … My sense would be to be patient. … It may take a couple times to get through, to get yourself inserted into the chain.

Every one of those big lenders has a new priority in the world with a lot of attention from some relatively powerful people in Washington. Those top 20 servicers are under a microscope right now. My sense is: Tell those borrowers there's a new world out there, and take advantage of the momentum while it's still flowing in their direction.

Schwartz: Servicers get hundreds of thousands of calls on the phone because of other things. Certainly a theme of Hope Now is be prepared, staff up, have your capacity improved and be able to meet the demand of the homeowner who needs your help.

Q: How much more of this trouble can we expect?

Robbins: I think California has maybe two more quarters of tough sledding and things are going to get better. … It's just a 36-year gut feeling kind of thing.