2.3 Million Home Loans Due for Raises
Treasury Secretary Henry Paulson and federal banking regulators are working out the details of a plan to extend lower, introductory interest rates on home loans before they reset at higher levels.
Paulson and the regulators met Thursday morning with loan servicing companies — which collect and distribute loan payments — and other industry executives. A formal agreement had not yet been announced as of Thursday, but could be unveiled early next month.
“We’ve all agreed that there should be some sort of standardized approach to reaching more homeowners faster,” said Treasury Department spokeswoman Jennifer Zuccarelli, who declined to name those at the meeting.
Among the executives at the meeting were David Lowman, head of JPMorgan Chase & Co.’s home lending business and Michael Held, a division president with Wells Fargo & Co.’s home mortgage unit, company representatives said.
The mortgage industry and federal regulators have been under intense pressure from activists, lawmakers and consumer groups to help borrowers stave off foreclosure, particularly as adjustable-rate mortgages begin to reset, meaning much higher payments.
Last week, California officials announced a deal with four major loan servicing companies.That agreement with Gov. Arnold Schwarzenegger includes Countrywide Financial Corp., GMAC Financial Services, Litton Loan Serving and HomEq Servicing.
There are an estimated 2.3 million borrowers with poor credit records whose home loans are projected to reset at higher rates through the end of next year. There are fears many of those loans risk default, worsening the nation’s soaring foreclosure rate.
Federal regulators have developed differing proposals for what to do about the problem. Sheila Bair, chairman of the Federal Deposit Insurance Corp., has been urging mortgage servicing companies to agree to widespread, permanent conversions of adjustable-rate loans to fixed-rate loans for homeowners who are current on mortgage payments but unable to afford loans at higher rates.
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