U.S. Treasury Secretary Henry Paulson last Wednesday assembled a group of mortgage providers, counselors, investors and industry groups to seek ways to help Americans caught in the subprime lending crisis keep their homes.
“This coalition has a lot of work to do,” Paulson said. “Only through better integration of their efforts can mortgage counselors and mortgage servicers reach the greatest number of borrowers facing payments they can’t meet.”
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The group, which includes 11 companies that administer 60 percent of U.S. mortgages, is President George W. Bush’s latest response to the record number of foreclosures at the center of the subprime collapse. Lenders began foreclosing on as many as 345,135 homes in the second quarter, according to the Mortgage Bankers Association.
Paulson urged distressed homeowners to contact their lenders and “explore financial options.”
Bush on Aug. 31 said that some borrowers that risk losing their homes will be able to refinance into mortgages backed by the Federal Housing Administration.
The FHA, which insures mortgages for low- and middle-income borrowers, has said it plans in the fiscal year that began Oct. 1 to assist in the refinancing of about 80,000 more loans than under prior programs.
The Office of Federal Housing Enterprise Oversight, the regulator for Fannie Mae and Freddie Mac, said on Sept. 21 that it may as early as February lift the caps on the companies’ $1.5 trillion portfolio of mortgage assets, one of two main sources of profit at the firms. The agency on Sept. 19 raised the portfolio limit at each company to $735 billion for the third quarter and granted a 2 percent increase over the next year.
“I’m not announcing that we have solved this problem,” Paulson said. “What we’re announcing is a necessary step toward a very important objective. We all have a lot of work to do.”
Paulson didn’t elaborate on how the mortgage market alliance would proceed and he called on more companies and organizations to join the group.
“We need greater participation if we are going to get to all those that need help as quickly as possible,” Paulson said.
U.S. bank regulators last month urged mortgage lenders to stave off foreclosures by cutting or postponing home payments for cash-strapped borrowers.
Federal Reserve Bank of Boston President Eric Rosengren said in a speech Wednesday that the central bank wants lending to continue in the subprime mortgage market. “There is an opportunity for commercial and savings banks to help provide liquidity in this market,” and help in refinancing loans, he said. •
With reporting by James Tyson in Washington
