Most Mortgage Servicing Giants Agree To Foreclosure Prevention Plan

By admin • February 26th, 2009
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Two-thirds of mortgage servicers have agreed to implement the foreclosure-mitigation policies outlined by Treasury Secretary Timothy Geithner last week, a top Senate Democrat said Wednesday. According to a senior financial-industry lobbyist, this includes the four-largest national mortgage servicers: Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co.

 

Senator Charles Schumer, D-N.Y., the No. 3 Senate Democrat and a member of the Senate Banking Committee, said mortgage servicers had a lot more confidence now that the Obama administration had provided details of how it wanted banks to tackle the foreclosure crisis. “Two-thirds of servicers are the large banks that are part of the Troubled Asset Relief Program,” Schumer said. “They’ve already agreed they are going to refinance now that they are no longer worried about getting sued.” An aide to Schumer said new Housing and Urban Development Secretary Shaun Donovan gave the senator the two-thirds figure. He also said that the prospect of a law amending the bankruptcy code to allow judges to dictate new terms on mortgages in the event of an individual filing bankruptcy, was also likely a significant factor in the companies’ willingness to cooperate with the administration’s plans.

 

The House is working on legislation which would be aimed at helping people in bankruptcy to hang on to their primary residences. It could see bankruptcy judges compelling mortgage-servicing companies to accept new terms on an individual’s home loan. Other than Citigroup, other large banks remain opposed to the bankruptcy-law change, arguing that it would lead to borrowers to seek bankruptcy at the first sign of trouble, rather than consider other options that might be more costly. The Geithner plan urged lenders to offer loan modifications to troubled borrowers to lower their monthly repayments so that they made up no more than 31% of their net income. The federal government would help to subsidize the costs mortgage servicing companies incur from extending mortgage loan modifications.

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