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In this letter, congressmen Barney Frank and Christopher Dodd urge regulators to investigate whether servicers are preventing loan modifications due to the presence of second lien mortgage loans on their books.
In this letter, congressmen Barney Frank and Christopher Dodd urge regulators to investigate whether servicers are preventing loan modifications due to the presence of second lien mortgage loans on their books.
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In this letter, congressmen Barney Frank and Christopher Dodd urge regulators to investigate whether servicers are preventing loan modifications due to the presence of second lien mortgage loans on their books.
Droits d'auteur :
Attribution Non-Commercial (BY-NC)
Formats disponibles
Téléchargez comme PDF ou lisez en ligne sur Scribd
Congress of the United States
@Baashington, BE 20510
July 10, 2009
‘The Honorable Ben Bernanke ‘The Honorable Sheila C. Bair
Chairman Chairman
Board of Govemors of the Federal Deposit Insurance
Federal Reserve System Corporation
20" and Constitution Avenue, NW 550 17" Street, NW
Washington, DC 20551 ‘Washington, DC 20429
‘The Honorable John Dugan Mr. John E, Bowman
Comptroller of the Currency Acting Director
Office of the Comptroller of the Currency Office of Thrift Supervision
‘Administrator of National Banks 1700 G Street, NW
Washington, DC 20219 Washington, DC 20552
‘The Honorable Michael E. Fryzel
Chairman
‘National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428
Dear Sirs/Madam:
One of our highest priorities as Chairmen, respectively, of the Senate Committee on
Banking, Housing, and Urban Affairs and the House of Representatives Financial Services
Committee has been to help people save their homes from foreclosure. To do so, we have sought
to create adequate tools to address the foreclosure crisis created by the bubble in housing prices,
aggressive marketing of risky mortgages, weak underwriting standards, and inadequate regulation.
A key part of this effort was the creation of the HOPE for Homeowners (H14H1) program,
enacted as part of the Housing and Economic Recovery Act of 2008 (HERA), and the
improvements made to the program in the Helping Families Save Their Homes Act of 2009. The
program is premised on the view, expressed by Federal Reserve Board Chairman Bernanke and
others, that the creation of equity for troubled homeowners is likely to be an effective tool for
helping families keep their homes and avoid foreclosure.
In recent discussions with servicers, investors in mortgage backed securities, and
Administration officials, it has become clear that one of the most significant impediments to the
success of H4H is the unwillingness of subordinate lien holders to extinguish their liens as
required for participation in this program, even in return for offers of reasonable compensation.
‘This is true despite the fact that these subordinate liens may have minimal economic value.
We understand that the nation’s largest mortgage servicers carry on their balance sheets
significant volumes of these subordinate liens in the form of closed-end second mortgages or
home equity lines of credit. We are concerned that the loss allowances associated with these
subordinated liens may be insufficient to realistically and accurately reflect their value, especially
in light of the historically poor performance of first lien mortgages and seriouslydiminished values of the underlying collateral. As you know, the nation has experienced sharp
declines in home prices, with further declines expected in many markets. This has resulted in as,
many as 20 percent of all homeowners having mortgages that exceed the value of the home.
‘These numbers are likely to be much higher in the case of option ARMs and subprime loans.
Many subordinate liens stand behind these mortgages. Carrying these loans at potentially
inflated values may contribute to resistance on the part of servicers to negotiate the disposition of
these liens, and thus may stand in the way of increasing participation in the H4H1 program.
Inadequate reserving would also overstate the capital position of these institutions at a time when
an accurate picture of the capital adequacy of the banking system is crucial.
We urge you and your staff to look into this issue as expeditiously as possible to ensure
that we can achieve the vital goal of the H4H to help American families build equity and keep
‘their homes. Please be in contact with us or our staff to review your findings in this area as soon
as possible.
‘Thank you for your prompt attention to this matter.
Sincerely,
Qh. SM
CHRISTOPHER DODD EY BRANK
Chairman Chairman
Senate Committee on Banking, Housing and House of Representatives Committee
Urban Affairs on Financial Services