US Treasury wants lenders to rework loans

Source : Business Times – 30 Nov 2009

The US Treasury Department wants lenders and companies that process monthly mortgage payments to do more to rework troubled home mortgage loans and will announce new measures today aimed at achieving that goal, a department spokeswoman said on Saturday.

The New York Times in its Sunday edition quoted Michael Barr, the Treasury Department’s assistant secretary for financial institutions, as expressing dissatisfaction with lenders over the slow pace at which they are amending loan agreements to help borrowers make their monthly payments. ‘The banks are not doing a good enough job,’ the Times quoted Mr Barr saying in a Friday interview. ‘Some of the firms ought to be embarrassed, and they will be.’

Treasury spokeswoman Meg Reilly said on Saturday that the department was ‘taking additional steps to enhance (mortgage) servicer transparency and accountability as part of a broader focus on maximising conversion rates to permanent modifications.’

That could include new resources for borrowers, Ms Reilly said without offering details. The department will announce new measures today, Ms Reilly added.

The Treasury Department has said that lenders have boosted efforts to modify mortgage payments – essentially by reducing monthly payments so that chances of foreclosure decrease. But there are widespread reports that borrowers continue to have problems negotiating with banks and mortgage brokers to get their payments lowered.

Most loans, modified by banks under a programme that Treasury monitors, remain in a trial stage, and only a small percentage have become permanent.

Mr Barr was quoted by The New York Times as saying that the Obama administration will try to shame lenders by publicly naming institutions that fail to move quickly enough to lower mortgage payments permanently. ‘They’re not getting a penny from the federal government until they move forward,’ Mr Barr told the Times.

White House spokeswoman Jennifer Psaki told the Times that the Obama administration would continue to refine the mortgage programme as needed. ‘We will not be satisfied until more programme participants are transitioning from trial to permanent modifications,’ Ms Psaki was quoted as saying.