Major Home Mortgage Lenders Agree on Principles for Borrowers in Trouble
Several major participants in the home mortgage market have agreed to adopt a set of principles for dealing with homeowners with high-priced home loans who face possible foreclosure, the chairman of the Senate Banking Committee said.
Sen. Christopher Dodd, D-Conn., urged such voluntary action by mortgage lender groups and other players two weeks ago when he convened a meeting of their officials and federal regulators to discuss possible solutions to the crisis gripping the market for high-risk loans.
Such industry initiatives are preferable, in Dodd’s view, to any government bad credit mortgage bailout to cover the rising number of mortgage loans in default.
Those agreeing to the principles include the Mortgage Bankers Association; Wall Street powers Citigroup Inc., JPMorgan Chase & Co. and HSBC Holdings Corp.; government-sponsored mortgage finance giants Fannie Mae and Freddie Mac; AARP; and the Leadership Conference on Civil Rights.
Several activist and community groups receive money from financial groups and work with homeowners on mortgage refinancing of high-rate loans.
Among the principles:
- Contacting distressed borrowers promptly to try to work out arrangements
- Making home loans more affordable by reducing mortgage rates
- Changing terms and other means
- Providing mortgage refinance options at the lowest cost possible for those who are eligible
“These principles represent a critical step in preserving homeownership and economic opportunity,” Dodd said.
“The companies and organizations that endorse these principles demonstrate their commitment to being part of finding solutions to foreclosures.”
Some companies participating in the April 18 meeting, however, including Countrywide Mortgage and Wells Fargo & Co., did not endorse the set of principles.
Home mortgage delinquencies and foreclosures have been surging over the past few months, especially for people who took out subprime (bad credit) mortgages - higher-priced home loans for people with suspect credit or low incomes.
The distress has roiled financial markets and stoked widespread anxiety that it could even spill over into the broader economy.
Fannie Mae and Freddie Mac, the two biggest players in the $8 trillion mortgage market, recently committed to buy tens of billions of high-interest mortgages so that mortgage lenders can help borrowers refinance and avoid foreclosure.
SOURCE: North County Times