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Dodd, chairman of the senate committee on banking, housing, and urban affairs, said the agreement was the result of a homeownership preservation summit two weeks ago. The meeting was intended to determine how to prevent foreclosures for subprime borrowers facing payment resets on their adjustable-rate mortgages.“The Mortgage Bankers Association endorses the homeownership preservation principles developed,” John M. Robbins, chairman of the trade group, said in an announcement yesterday. “Our goal must be to maximize the number of homeowners who are able to stay in their homes who would otherwise be threatened with default and foreclosure as their subprime hybrid ARMs reset.” The first principle outlined in the statement was contact with borrowers prior to resets to determine whether payment default is likely. For borrowers who are unable to afford higher payments, “servicers should seek to modify loans prior to the reset,” according to the document. The modification should be a life-of-loan change — and not just a deferral of the rate reset. Leaving the introductory teaser rate in place for the life of the loans was among potential modifications outlined. Others included lowering the interest rate, reducing the principal loan balance and re-amortizing the loan term. Establishing escrow accounts was also suggested. Servicers also agreed to beef up special teams and use third parties to help speed up and execute the process. The document also called for prime mortgage refinances, whenever possible, and assistance from Fannie Mae, Freddie Mac and the Federal Housing Administration. Chase Home Lending CEO David Lowman expressed his company’s support of the principles, though he noted the lender must still continue to adhere to contracts with investors and bondholders, according to a statement Monday from parent JPMorgan Chase. The New York-based company said an office it created three years ago to work with consumer advocates has held more than 45 foreclosure prevention sessions — training more than 1,500 individuals including profit counselors, housing advocates and public officials. “HSBC has been servicing customers for more than 125 years, through many credit cycles and a wide range of economic circumstances,” HSBC Finance Corp. CEO Brendan McDonagh was quoted as saying. “We take the current mortgage environment seriously and we are taking strong and proactive steps to minimize the impact on our customers.” HSBC said its own foreclosure avoidance program developed in 2003 has provided $100 million in financial relief. Larry B. Litton Jr., president and CEO of Litton Loan Servicing, was quoted in the Senator’s announcement as saying that the principles are in line with practices it has used for years. “The GSEs should also explore opportunities to buy subprime portfolios and modify them according to these principles,” the statement said. “I applaud the tremendous leadership demonstrated by the Mortgage Bankers Association, Citigroup, JPMorgan Chase, Litton Loan Servicing, HSBC, Bear Stearns, Freddie Mac, Fannie Mae, the Self-Help Credit Union, the Leadership Conference on Civil Rights, AARP, and ACORN to take active and effective measures to preserve homeownership for families at risk of losing their homes,” Dodd said in his announcement. |
