NEW YORK (CNNMoney.com) -- A key House committee was set to grill home lenders and housing advocates on Friday about mortgage industry efforts to work out affordable loans for troubled homeowners.
The House Financial Services Committee plans to hear from executives at two big lenders: Michael Gross of Bank of America Corp. (BAC, Fortune 500) and Mary Coffin of Wells Fargo & Co. (WFC, Fortune 500) Also testifying is Faith Schwartz, the executive director of Hope Now, an industry alliance of lenders, loan servicers and housing counselors.
The House Financial Services Committee is chaired by Rep. Barney Frank, D-Mass., who has led the House's legislative response to the housing crisis. On Wednesday, the House passed sweeping legislation that will offer up to $300 billion in assistance to troubled homeowners and throw government support behind mortgage finance giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500). The Senate is expected to vote on the bill on Saturday.
"Reducing foreclosure is an essential matter of justice and an essential matter [for the economy as well]," Frank said in his opening remarks.
He also urged lenders and loan servicers - the middlemen that administer and collect payments on the loans - to inform the committee of any barriers to their foreclosure prevention efforts that still exist after the bill takes effect in October.
"There are no silver bullets," he said. "I'm not the Lone Ranger. If there are obstacles, tell us. And we will do the best we can to remove those obstacles."
Bank of America's Gross said in prepared testimony that the bank will modify and work out at least $40 billion in mortgages by the end of 2009, helping about 250,000 troubled homeowners.
"We know that consumers who are experiencing financial challenges, but who ultimately have the ability to repay their loans, often need our help to stay in their homes," Gross said. "We are ready to help them. We do so because no one benefits from a foreclosed home."
Many critics of the mortgage industry have charged that lenders and loan servicers are dragging their feet when it comes to helping at-risk mortgage borrowers.
But David Kittle, chairman-elect of the Mortgage Bankers Association, said that wouldn't be in their best interest. "It makes good economic sense for mortgage servicers to help borrowers who are in trouble," he said. "Foreclosure is a lengthy and extremely costly process for the industry and, generally, a losing financial proposition. Several independent studies have found the losses to be quite significant: over $50,000 per foreclosed home or as much as 30 to 60 percent of the outstanding loan balance."
Still, foreclosures are growing at a faster rate than mortgage workouts, according to the most recent data from Hope Now. Meanwhile the housing crisis continues to deepen.
Home prices have plunged 15% nationwide over the past 12 months, according to the S&P/Case-Shiller Home Price Index. More than 340,000 borrowers have lost their homes to foreclosure during the first six months of the year, up 136% compared with the same period in 2007. The number of homeowners in default during the same period rose to 1.4 million, up 56% from a year earlier.
The housing rescue bill should help to break the cycle, and lenders and loan servicers are promising to do more to keep borrowers in their homes.
"Since last fall, we have been working aggressively to address these problems," Hope Now CEO Faith Schwartz said in prepared testimony. "The goal of Hope Now is to keep more people in their homes"
Hope Now has recently announced new guidelines that were intended to speed up the mortgage modification process and keep borrowers better informed of its progress.
Loan servicers have pledged to respond to a borrower's request for a workout within five days, and come to a decision on the modification within 45 days.
Hope Now also promised to improve the way it reports the number of people it has helped. Critics, such as FDIC chief Sheila Bair, would like to see much more detail about what kind of mortgage workouts Hope Now members are arranging. Right now, it reports workouts only under very broad categories.
"This is a serious committed effort that will continue until problems in the housing and mortgages market abate," Schwartz said in prepared testimony. "It is neither a silver bullet nor a magic solution, but this effort will continue to compliment the efforts of legislators and regulators as we work through the housing issues."
See Also:
- Zaio national database of photos enhances automated valuation products
- Gurgaon- Ultimate Destination for Developers
- Arbor Realty Trust Declares Second Quarter 2008 Dividend
- Freddie Mac Monthly Volume Summary: June 2008
- Arbor Realty Trust Declares Second Quarter 2008 Dividend
[Via Home Mortgage Rates and Real Estate News]
No comments:
Post a Comment