U.S. to Banks: Expand Foreclosures Prevention Effort

The federal government has asked 25 of the biggest mortgage finance companies in the country to expand and intensify their home loan modification programs in order to help more distressed homeowners avoid foreclosures.

U.S. Department of Housing and Urban Development Secretary Shaun Donovan and Treasury Secretary Timothy Geithner suggested that there is a need for mortgage finance companies to put in more resources to the foreclosures prevention program in order for the initiative to succeed and achieve the goal of helping more homeowners remain in their homes.

They said that appointing a special liaison officer would work favorably on mortgage servicers. They explained that this officer will work directly with both local and federal officials who are handling the initiative designed to help about 4 million homeowners from losing their properties to foreclosure.

The Treasury has scheduled a meeting with several mortgage servicers on July 28 to discuss and hear how these companies are expanding their foreclosure prevention programs and to make sure that borrowers who are eligible to receive help are not being turned away.

Meanwhile, Representative Barney Frank and Senator Christopher Dodd are also promoting the foreclosures prevention initiative by asking financial regulators to investigate if banking institutions are discouraging loan modification efforts by increasing the values of second mortgage loans on their financial records.

According to both lawmakers, inflating the values of these loans may prevent mortgage servicers from negotiating for the settlement of the liens, and thus, it will hinder increase participation in the housing recovery efforts of the U.S. government.

Data released by financial regulators showed the industry responding to the repossession crisis by offering more loan modifications. But at the same time, data showed that the number of delinquent loans continues to increase.

In the first quarter, mortgage servicers were able to modify 185,156 troubled loans, representing a 55 percent increase from the fourth quarter of 2008.

According to the Office of Thrift Supervision and the Office of the Comptroller of the Currency, the number of mortgage loans that are delinquent for two months of more have increased by almost 9 percent in the first quarter, compared with the previous quarter.

JPMorgan Chase and Co. claimed that it modified 87,100 loans while Bank of America Corp. said that it received an average of 80,000 calls daily from homeowners seeking advice on how to avoid foreclosures.