DODD, DEMOCRATS PRESS TREASURY TO USE ITS LEVERAGE TO HELP STRUGGLING HOMEOWNERS
June 24, 2009
WASHINGTON, DC – In an effort to help stabilize the housing market and ensure that banks and loan servicers are held accountable to requests for needed assistance, U.S. Senators Chris Dodd (D-CT), Jack Reed (D-RI), and 18 of their Senate colleagues sent a letter to U.S. Treasury Secretary Timothy Geithner urging him to develop and implement a strategy requiring banks and loan servicers participating in the Administration’s foreclosure prevention programs to effectively respond to qualified homeowners seeking assistance.
“President Obama and his Administration have taken important steps to help families stay in their homes, but more needs to be done,” said Dodd, the Chairman of the Senate Committee on Banking, Housing, and Urban Affairs. “Banks and loan servicers who have agreed to participate in the Administration’s foreclosure prevention programs must hold up their end of the bargain and Treasury Secretary Geithner must remain vigilant to ensure that they do so.”
“In order to stabilize the economy we need to stabilize the housing market. Companies that have agreed to participate in the Administration’s foreclosure prevention programs must be held accountable, especially when they are simultaneously receiving taxpayer dollars,” said Reed, a senior member of the Banking Committee, which oversees federal housing policy. “Homeowners who are looking to get help before it’s too late should not have to wait two months to receive an answer to their questions. The Administration must keep pushing to ensure that servicers’ public pronouncements translate into relief for homeowners.”
A recent report from the National Foreclosure Mitigation Counseling Program indicates that homeowners are waiting, on average, 45-60 days for responses to requests for help. Other homeowners have found servicers reluctant to make meaningful changes to the terms of their mortgages despite advertised participation in the Administration’s foreclosure prevention initiatives.
Senator Dodd recently raised this issue with Treasury’s Assistant Secretary for Financial Stability Herbert M. Allison at his confirmation hearing before the Banking Committee, asking him to provide the Committee and the public with detailed information about how many homeowners are receiving assistance under the foreclosure mitigation plan and the extent to which individual loan servicers are complying with the program.
The senators also noted that they are concerned about the large number of option adjustable rate mortgages (ARMS) scheduled to reset in the next four years. News reports indicate the number of option ARMs in question to be one million.
“Without servicers taking proactive steps to reach these homeowners and careful vigilance on the part of the Department of Treasury and others to ensure that outreach translates into real relief, efforts to stabilize the housing market could be undermined,” the senators wrote. “In addition to the outreach that servicers may be doing to contact homeowners with option ARMs, what assurances have the Department of Treasury and its agents received that servicers are developing the capacity to respond to the potential onslaught of requests for modifications?”
Text of the letter to Treasury Secretary Geithner follows:
June 24, 2009
The Honorable Timothy F. Geithner
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
Dear Secretary Geithner:
We write to urge you to use the full measure of your authority to ensure that servicers participating in the Administration’s foreclosure prevention programs more quickly and effectively respond to homeowners seeking assistance.
The original Bush Administration efforts failed in both scope and execution to fend off foreclosures. Since then, the Department of Treasury, in conjunction with the Department of Housing and Urban Development, has taken steps to improve the situation. Specifically, in creating the Making Home Affordable Program and in supporting improvements to the Hope for Homeowners Program, you have begun to provide homeowners at risk of foreclosure access to sustainable mortgages.
However, as you know, the situation remains grave. News reports indicate that one million foreclosures have already been filed this year. One estimate suggests that an alarming 9.12 percent of the nation’s home loans are delinquent or in some stage of foreclosure, up from 6.35 percent at the same time last year.
In light of the continuing crisis in the housing market, we are concerned about the difficulty that too many homeowners are still facing in accessing the government’s foreclosure prevention programs through their servicers. Statistics from the National Foreclosure Mitigation Counseling Program indicate that homeowners are waiting, on average, 45 to 60 days for a response. It is also our understanding that as servicers take a triage approach to responding to inquiries, homeowners who are still current on their payments but at risk of foreclosure are being told to wait for assistance--even as their economic conditions worsen.
Additionally, we are concerned about the large number of option adjustable rate mortgages scheduled to reset in the next four years. A recent Bloomberg News article estimates the number of option ARMs in question to be one million. Without servicers taking proactive steps to reach these homeowners and careful vigilance on the part of the Department of Treasury and others to ensure that outreach translates into real relief, efforts to stabilize the housing market could be undermined.
Though the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation have been engaged as agents for the Making Home Affordable Program, ultimate authority rests with the Department of Treasury. As such, we would appreciate answers to the following questions:
1. To the extent that the problem lies with servicer capacity, what specific strategies are you implementing to encourage capacity expansion? Has any consideration been given to requiring participating servicers to submit detailed plans for hiring and training new staff, updating information systems, and making any other changes necessary to respond to homeowners in a timely fashion?
2. As Treasury and its partners develop data monitoring systems, what criteria will be used to evaluate servicer performance? What remedies will be put in place to address servicers who do not meet performance standards?
3. In addition to the outreach that servicers may be doing to contact homeowners with option ARMs, what assurances have the Department of Treasury and its agents received that servicers are developing the capacity to respond to the potential onslaught of requests for modifications?
4. It is our understanding that homeowners at imminent risk of foreclosure but not yet delinquent are encountering the biggest delays, due to capacity but also due to other factors such as investor reluctance to agree to modifications. What specific strategies will be implemented to meet the needs of qualified borrowers in this category?
5. A recent program update suggested more than 75 percent of all loans in the country are now covered by the Making Home Affordable Program. However, what steps are being taken by the Department of Treasury to encourage the remaining servicers to participate?
6. Congress recently passed the Helping Families Save Their Homes Act to further encourage servicers to offer loan modifications and expand the reach of existing homeowner assistance programs. What further legislative tools do you require, if any, to encourage servicers to more effectively respond to homeowner inquiries?
The Department of Treasury must ensure that servicers participating in the Home Affordable Modification Program and other foreclosure prevention initiatives fulfill program goals and provide relief to qualified homeowners. We know that the task of addressing these issues is complicated and we look forward to working with you to ensure that homeowners get the assistance they need.
Jack Reed (D-RI)
Chris Dodd (D-CT)
Harry Reid (D-NV)
Chuck Schumer (D-NY)
Robert Menendez (D-NJ)
Daniel Akaka (D-HI)
Sherrod Brown (D-OH)
Jeff Merkley (D-OR)
Patrick Leahy (D-VT)
Thomas Carper (D-DE)
Carl Levin (D-MI)
Kirsten Gillibrand (D-NY)
Russ Feingold (D-WI)
Frank Lautenberg (D-NJ)
Jeanne Shaheen (D-NH)
Tom Harkin (D-IA)
Bill Nelson (D-FL)
Joe Lieberman (ID-CT)
Dianne Feinstein (D-CA)
Claire McCaskill (D-MO)