Treasury’s Steel Urges Mortgage Industry to Reduce Foreclosures

April 28 2008 - Robert Steel, the Treasury’s undersecretary for domestic finance, urged the mortgage industry to increase efforts to help homeowners by modifying loan terms for borrowers at risk of foreclosure.

Steel’s remarks today come after an April 23 meeting Treasury Secretary Henry Paulson convened with representatives of a group of major banks and mortgage servicers to “reach and help more homeowners,” according to a meeting agenda obtained by Bloomberg News. The Hope Now alliance includes banks such as JPMorgan Chase & Co. and Citigroup Inc.

The meeting and Steel’s remarks indicate the Bush administration still favors voluntary industry-led efforts over congressional action to curb the surge in foreclosures stemming from the worst housing slump in a quarter century. Paulson last year helped launch Hope Now to encourage lenders to offer struggling borrowers more affordable loan terms.

“We continue to work with the Hope Now Alliance to gauge progress and evaluate ways for further success,” Steel said in a speech at the Society of American Business Editors and Writers conference in Baltimore. “The industry is proving it has the ability to help able homeowners avoid foreclosure, and we look forward to continued progress in the near future.”

During the meeting, Paulson also sought to consider the impact of Hope Now’s effort to freeze interest rates for some borrowers for five years and a subsequent approach called “Project Lifeline” to offer 30-day foreclosure freezes to give delinquent borrowers more time to arrange payment plans, according to the agenda.

Items Discussed

Other items up for discussion included gauging the number of borrowers reaching out for help, determining where Hope Now should focus its efforts and whether servicers believe homeowners who have the “basic financial capability to own their homes are losing their homes to foreclosure.”

“We’re all working toward continued solutions and efforts,” said Faith Schwartz, Hope Now’s executive director, who attended the meeting.

Nearly 503,000 homeowners kept their homes in the first quarter of 2008 because of repayment plans and loan modifications arranged with servicers, the Washington-based Hope Now reported today. Servicers have modified loan terms for about 1.38 million homeowners since July 2007, the group said.

Executives representing Wells Fargo & Co., Bank of America Corp., Washington Mutual Inc., Countrywide Financial Corp. and Ocwen Financial Corp. also attended the meeting, according to a personal familiar with the talks.

Charlotte, North Carolina-based Bank of America, which is seeking approval for its $4 billion takeover of Countrywide, today announced it will modify at least $40 billion in troubled mortgages over the next two years.

Treasury’s Steel Urges Mortgage Industry to Reduce Foreclosures
By Alison Vekshin | Bloomberg