US weighs possibility of troubled mortgage loan guarantees
US lawmakers, feeling that the Bush administration has not shown “the required dedication” to curb mortgage foreclosures, urged the administration to step up aid to struggling homeowners. They opine that the Treasury’s plans to buy stakes in banks will not be enough to fix the housing collapse that underlies the financial crisis.
Officials said they were weighing the possibility of government guarantees for troubled mortgage loans to try to induce lenders to modify terms and slow a rising tide of home foreclosures. Federal Deposit Insurance Corp. Chairman, Sheila Bair, said loan guarantees might be a way to influence mortgage servicers to modify their loans.
At the same time, underscoring her frustration with the slow pace at which lenders have been modifying loans, Bair said: “We are falling badly behind and more needs to be done.” She called for a “carrot as well as a stick approach” to push mortgage servicers to rewrite loans, and said the FDIC is prepared to serve as a contractor on the loan guarantees.
Research firm RealtyTrac said on Thursday that U.S. home foreclosure filings in the third quarter were up 71 percent from the same period a year earlier, even though foreclosure filings fell compared with August as some states slowed the process. A total of 765,558 properties got a default notice, were warned of a pending auction or had foreclosure proceedings start.
Senate Banking Committee Chairman and Connecticut Democrat, Christopher Dodd, opines: “The longer we allow foreclosures to erode family wealth, neighborhood stability, and financial market liquidity, the longer our economy will take to recover from this crisis.”