Government Regulator Urges Lenders to Temporarily Halt Foreclosures
The Office of Thrift Supervision â€” the government agency responsible for regulating more than 800 savings and loans that hold a large portion of the nationâ€™s mortgage loans â€” has asked its lenders to put a temporary moratorium on foreclosures, The Washington Post reports (â€śRegulator Calls for Lenders to Stop Foreclosures For Now,â€ť Feb. 11, 2009).
Thrifts regulated by the government office have been asked to suspend foreclosures until President Obamaâ€™s administration finalizes a new $50 billion plan to help troubled homeowners.
One of the largest savings and loans overseen by the Office of Thrift Supervision, ING Direct, says it has already imposed a moratorium on foreclosures effective through the end of March. â€śWeâ€™re not living under normal circumstances and we have to act differently and help everybody to get by as well as possible,â€ť said company spokeswoman Cathy MacFarlane.
Treasury Secretary Timothy Geithner said the Obama administration could unveil its $50 billion foreclosure initiative this week. Although consumer advocates and lawmakers support the governmentâ€™s latest efforts to stem foreclosures, they were disappointed at both the delay of the programâ€™s rollout and the lower-than-expected funds allocated for the plan.
Leaders Brainstorm Ways to End Foreclosure Crisis
To come up with foreclosure prevention solutions, Geithner and Shaun Donovan, secretary of the Department of Housing and Urban Development, sought the input of officials from nonprofits, banks, and industry groups during a meeting last week, The Washington Post reports.
One proposal that has received strong support involves the government purchasing troubled mortgages from lenders at a discount, and then enrolling homeowners in a loan modification program, said John Taylor, president of the National Community Reinvestment Coalition, a community-based organization that promotes access to affordable housing.
Another proposal, which backers say would stimulate the sagging housing industry, involves a tax credit for new homebuyers. Under the proposed program, which is estimated to cost the government $6.6 billion, first-time homebuyers would receive a tax credit equal to 10 percent of the value of the new home up to a maximum of $8,000. If homeowners sold the home within three years, they would be required to reimburse the government for the credit.
â€śThe thing that was striking was the uniformity of support for the idea that we can no longer rely on a voluntary systemâ€ť in which mortgage lenders lead the charge in the foreclosure prevention effort, Taylor said.
Obamaâ€™s plan is characterized as a â€śmore aggressive versionâ€ť of a mortgage loan modification plan implemented last year by government-owned lenders Fannie Mae and Freddie Mac that was criticized as falling far short of helping troubled homeowners. Advocates say they hope Obamaâ€™s new housing bailout bill, in whatever form it eventually takes, is implemented quickly and deals effectively with the foreclosure crisis.
â€śWe want to get a plan as soon as possible because the delay is causing homeowners to suffer even more than they have,â€ť said Pam Banks, policy counsel for Consumers Union, a consumer advocacy group. â€śTime is of the essence.â€ť
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