Congress, policymakers weigh subprime foreclosure fixes.
In early May, Senate Banking Committee Chairman and declared presidential candidate Christopher Dodd (D-Connecticut) said that leading mortgage market stakeholders--including the Mortgage Bankers Association--have agreed to a set of principles for families facing home foreclosure.
Among the seven principles laid out during Dodd's Homeownership Preservation Summit from the previous month were that mortgage servicers should work to modify the terms of subprime loans before interest rates reset higher, as well as make early contact with subprime borrowers with adjustable-rate mortgages (ARMs) to determine if they qualify for a more stable loan.
Servicers should also set aside dedicated resources and staff to help struggling borrowers, while Fannie Mae and Freddie Mac should work with lenders to make credit available to borrowers who have trouble refinancing subprime loans, according to Dodd.
"The crisis affecting the sub-prime market is a comprehensive one, and involves many parties. It cannot be solved overnight, and cannot be solved by one party acting alone. Each party needs to do its part in helping to address this problem," said Dodd. "I commend the organizations and companies that have joined me in formulating and agreeing to these principles, and I urge others to participate or face explaining to their customers and the public their refusal to adhere to commonsense guidelines that will help preserve homeownership and strengthen our communities and our nation's economy."
Later in May, the House Financial Services Subcommittee on Financial Institutions and Consumer Credit held its third in a series of hearings on the turmoil in the subprime mortgage market.
While hoping for a "market-based solution," subcommittee chairman Rep. Carolyn Maloney (D-New York) said that legislative remedies are on the table--including the possibility of a controversial "assignee liability" provision, despite the fact that a similar provision in a Georgia law several years ago resulted in a number of lenders pulling out of the state until the law was reworked.
"This committee is by no means waiting for the private sector to do what it thinks is right to solve this rapidly growing crisis. Market-based solutions sometimes don't provide sufficient protections to those with little market power--in this case, our constituents who face the loss of their home," said Maloney. "To help shift the balance, states have pioneered assignee liability protections that have had some good results, although the Georgia fiasco demonstrates what happens when one state goes too far."
From the policy-maker perspective, HUD Secretary Alphonso Jackson noted his department will continue to "vigorously investigate and prosecute" predatory lending cases, but the administration is opposed to a federal bailout of homeowners who took out subprime loans and sub-prime mortgage investors.
"While I have sympathy for people who are in a tricky situation, I strongly disagree that a bailout is the answer. Companies should not be rewarded for risky investment ventures that fail," said Jackson during HUD's Homeownership Summit in Washington, D.C., in May. "There is a reason it is called 'moral hazard.' The American taxpayer shouldn't foot the bill for risky ventures. And we should not reward investors who were fiscally irresponsible."
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|Title Annotation:||political aspects and services of mortgages and foreclosures|
|Comment:||Congress, policymakers weigh subprime foreclosure fixes.(political aspects and services of mortgages and foreclosures)|
|Date:||Jun 1, 2007|
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