FHFA Head:Make New Loan Modification Plan The Indus Standard
Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- The head of a federal agency Monday urged private mortgage servicers and investors in mortgage-backed securities to adopt a new government-sanctioned approach to loan modifications.
Writing to more than 40 mortgage servicers, Federal Housing Finance Agency Director James B. Lockhart said the approach should become "an accepted and broad-based industry standard" for helping strapped borrowers avoid foreclosure.
The program was unveiled by Fannie Mae (FNM), Freddie Mac (FRE) and U.S. officials earlier this month. It targets borrowers who are behind by three or more mortgage payments, with the aim of shrinking borrowers' mortgage debt to 38% of their household income.
Lockhart argued that the program, which only applies to mortgage securities guaranteed by Fannie and Freddie, needs to be adopted broadly by servicers of private label securities, or PLS, in order to be effective. Such securities are not guaranteed by Fannie or Freddie.
"It is critical that servicers of the loans backing PLS and trustees for those securities acknowledge a standard approach to expedite a cost-efficient program of loan modifications," Lockhart wrote, according to a copy of the letter released by the agency.
While private label mortgage securities represent only 20% of U.S. mortgages outstanding, they account for 60% of all seriously delinquent mortgages, Lockhart said. By contrast, mortgages owned or guaranteed by Fannie or Freddie represent just 20% of serious delinquencies.
Under the program, Fannie and Freddie agreed to stretch the term of the loan, decrease the interest rate or use principal forbearance.
Bush administration officials believe the approach could help thousands of borrowers stay in their homes. Critics say the program won't do enough to stop a wave of foreclosures. -Jessica Holzer, Dow Jones Newswires; 202-862-9228; jessica.holzer@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=XArlKZdU3IpnWbzCSPbKCA%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
November 24, 2008 17:37 ET (22:37 GMT)
Publié le 24 novembre 2008 Copyright © 2008 Dowjones
Partager sur:
