Do they need the encouragement?
Today six federal and state agencies issued a joint statement encouraging loan servicers to work with financially-strapped borrowers to avoid foreclosure.
They made some suggestions, and then, later today, issued a follow up statement, saying servicers should avoid changing a loan’s terms that result in a borrower spending more than 50 percent of his monthly income on loan payments. That would lead to more defaults, they said.
There’s been a bit of press lately, including coverage in this blog, on what happens to borrowers in financial trouble when the company they deal with doesn’t own their home loan. Sources tell me loan servicers generally have lots of leeway to work with borrowers. However, in some cases there is a limit, as low as 5 percent, to the number of loans they can modify or the total loan balance in dollar terms.
The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the National Credit Union Administration, and the Conference of State Bank Supervisors said servicers should review their contracts to see how much authority they have:
• “proactively identifying borrowers at heightened risk of delinquency or default, such as those with impending interest rate resets;
• contacting borrowers to assess their ability to repay;
• assessing whether there is a reasonable basis to conclude that default is “reasonably foreseeable”; and
• exploring, where appropriate, a loss mitigation strategy that avoids foreclosure or other actions that result in a loss of homeownership.”
To read the full statement, CLICK HERE. And read the follow-up statement HERE.
There is no free service in this country. Lenders and Loan Servicers are not going to help unless there is MONEY in it for them. If Government willing to buy these loans from them.
It looks like the “bailout” is going to be nothing more than lip service from our government. I would normally ridicule the ineffectiveness of government, but sometimes it’s a blessing in disguise.
Bernanke is book smart, not street smart. They can say whatever they want, hold up whatever chart they want, at the end of the day, you are on your own.
The sooner you and I admit it, the better. The tooth fairy ain’t comin’
Suggestion is cheap. President Bush struggling to find an additional 50 billion for war in Iraq. Where can our Government find more money to bail out trillion dollars Lenders, Bond Managers, and Investors? Print more money at will. NO BAIL OUT & HOUSING MARKET CORRECTION IS HEALTHY FOR ALL OF US.