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Lenders Satisfy Dodd, for Now, on Foreclosures

American Banker | Thursday, May 3, 2007
By Stacy Kaper
WASHINGTON - Two weeks after Senate Banking Committee Chairman Chris Dodd staged a summit with mortgage industry leaders on problems in the subprime market, lenders were still wrangling over how to handle the Connecticut Democrat's push for a set of foreclosure prevention principles.
Ultimately, most of the lenders at the summit agreed to the principles just before the Wednesday deadline set by Sen. Dodd. But two holdouts - Wells Fargo & Co., and Countrywide Financial Corp.- remained uncommitted amid fears that the principles would provide a blueprint for onerous legislation or open them up to more legal liability.
Sen. Dodd said the response was enough - for now.
"These principles represent a critical step in preserving homeownership and economic opportunity," said Sen. Dodd in a press release. "Each party needs to do its part in helping to address this problem. The companies and organizations that endorse these principles demonstrate their commitment to being part of finding solutions to foreclosures."
Of the summit participants, Citigroup Inc., JPMorgan Chase & Co., Litton Loan Servicing, HSBC Holdings PLC, Bear Stearns' EMC Mortgage, Freddie Mac, Fannie Mae, the Mortgage Bankers Association, the Center for Responsible Lending, the Leadership Conference on Civil Rights, AARP, and Acorn said they would support the principles. Bear Stearns' mortgage unit initially appeared Wednesday to be holding out against signing the principles, but said late in the day that they support them.
But Sen. Dodd said he hopes the holdouts and other lenders would come around.
"I urge others to participate, or face explaining to their customers and the public their refusal to adhere to common-sense guidelines that will help preserve homeownership and strengthen our communities and our nation's economy," said Sen. Dodd.
Wells Fargo said in a statement that it supports the "goals" set out by Sen. Dodd and that it already has adopted many of the principles in its procedures. The company offered no explanation for declining to sign on, however.
"We continue to collaborate with regulators and market participants to introduce greater levels of flexibility in loan modification for all parties - most importantly, the customer," Kevin Waetke, a Wells Fargo spokesman, wrote in an e-mail.
A spokeswoman for Countrywide did not return phone calls by deadline.
But several observers said the companies worried that agreeing to the principles would make them legally accountable to a set of standards, or that the principles would be the first step toward tough legislation.
With the exception of Citigroup, which immediately declared its support for the principles, most lenders said after the April 18 summit that they were not yet ready to sign on. Since then, lenders and industry representatives have struggled with how to move forward, several sources said.
Some industry trade groups have been assessing whether to agree to similar principles on their own; as of Wednesday, however, they had announced no formal plans.
The principles generally outline ways to help keep troubled borrowers in their homes. They say loan modification options should include reducing the interest rate and principal, reamortizing the loan, and escrowing for taxes and insurance.
Industry observers said Wednesday that they are uncertain whether the agreements to date will be enough to stop Sen. Dodd from pursuing legislation later.
"The question will be whether there's enough critical mass of an industry response to allow Dodd to say that industry has stepped up to the plate," said Howard Glaser, a mortgage industry consultant. "A less than unified response by the industry is probably not completely satisfactory to Dodd."
Kurt Pfotenhauer, the MBA's head lobbyist, said "Sen. Dodd has invested his time and personal political capital into finding solutions. The principles represent a good snapshot of the industry's best efforts to help borrowers."
Michael Calhoun, the president of the Center for Responsible Lending, said recognizing the problems with some adjustable-rate subprime loans is "a major sea change."
"If you had tried to get the MBA and others to sign on to that six months ago, I think your chances would have been one out of a hundred at best, so that makes it significant progress," he said.

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This article is from last year!

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Obviously the date of April 2008 is wrong.

However, it should be fairly recent as none of these entities were heavily involved in loss mitigation for sub prime borrowers with crappy loans.

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"We continue to collaborate with regulators and market participants to introduce greater levels of flexibility in loan modification for all parties - most importantly, the customer," Kevin Waetke, a Wells Fargo spokesman, wrote in an e-mail.


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