Wednesday, October 24, 2007

Lenders pressured to help homeowners

crain's new york

Lenders pressured to help homeowners
October 24. 2007 3:55PM
By: Tom Fredrickson

NY city and state comptrollers are teaming up with advocacy Acorn to push mortgage lenders into rescuing homeowners facing foreclosure.

The comptrollers of New York City and state are teaming up with national grassroots advocacy group Acorn to pressure mortgage lenders into rescuing homeowners headed for foreclosure.

William Thompson Jr. and Thomas DiNapoli, city and state comptrollers, respectively, said Wednesday in a press conference they plan on meeting jointly with mortgage lenders and those that service the loans to extract commitments to help borrowers facing foreclosure.

Acorn estimates that 2,297 high-cost loans made in New York City in 2006 will likely go into foreclosure, mainly in southeastern Queens. The cost to homeowners, lenders and local government could reach $487 million, according to Acorn.

To get the lenders to the table, the comptrollers say they plan on using their leverage as pension managers and shareholders of thousands of public companies.

I think with the combined financial might of pension funds in excess of $250 billion we will be able to ask them to sit and meet with us,

Mr. Thompson said.Acorn and the comptrollers will ask mortgage companies, including Countrywide Financial, Chase Home Finance and CitiMortgage--the three largest subprime mortgage servicers nationally to commit to three principles:
-- aggressively reach out to borrowers in default or facing resetting adjustable rate mortgages;-- evaluate borrowers ability to pay mortgages based on total household expenses;
--emphasize long-term solutions including loan modifications and conversion of adjustable to fixed-rate loans.

Peggy Morris, chairwoman of New York Acorn's Queens chapter, choked up as she recounted an event that occurred Tuesday. She said an elderly Queens resident who was called from her job to answer a foreclosure action suffered an asthma attack. The distressed homeowner could barely negotiate the steps of the Queens courthouse.

"I had to call her a cab," said Ms. Lewis, who noted that other Queens seniors facing foreclosures have suffered from heart attacks and strokes related to the pressure of losing their homes.

Acorn officials, who plan to wage their campaign nationally, were also critical of a plan Countrywide announced this week to refinance $16 billion worth of mortgages. But if the new loans are going to be backed by the Federal Housing Administration, something Countrywide wants, most borrowers of subprime loans in southeast Queens would not qualify because their loans are larger than the FHA limits.

While city officials say many subprime borrowers could afford conventional loans, Bertha Lewis, executive director of New York Acorn, said that is not always the case. Countrywide would not be solving any problems, just delaying them, because many borrowers falling into default can't afford conventional-rate loans, either. The lenders and mortgage servicers need to radically lower rates to keep the new loans affordable, she said.

The Mortgage Bankers Association said it had not been included in any discussions about the mortgage principles, but that it supported efforts to help homeowners. "MBA and its members remain committed to communicating and working with delinquent customers in order to minimize the number of homes that complete the foreclosure process," the trade group said in a statement.

Reader Comments
On 2007.10.24 04:26 pm, Edward Cohen AIA said:
Isn't it better for the banks to renogotiate loans than to foreclose? In the end all are losers.
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