- The Washington Times - Thursday, September 18, 2008

The government’s takeover of mortgage-finance companies Fannie Mae and Freddie Mac should provide an opportunity to modify more home loans for troubled borrowers, government officials said Wednesday.

Both companies are “looking at loan modification programs that can be done through mass solicitation programs with streamlined processing,” said James Lockhart, director of the federal agency that took over Fannie and Freddie earlier this month.

Such an effort could have a tremendous impact because Fannie and Freddie own or guarantee more than $5 trillion in loans, about half of the nation’s total.

“There are still a lot of mortgages out there that need to be restructured and families that can still be helped,” Sheila Bair, chairman of the Federal Deposit Insurance Corp., told lawmakers Wednesday.

With 1.5 million foreclosures last year and 1.2 million already in the first six months of this year, the foreclosure crisis is accelerating, she said.

Under Ms. Bair’s stewardship, the FDIC has rolled out a plan to help refinance delinquent IndyMac Bank borrowers into 30-year mortgages with interest rates capped at 5.9 percent. The FDIC introduced the program about a month ago after it seized the Pasadena, Calif., lender, now called IndyMac Federal Bank, in July.

Some lawmakers and consumer advocates are urging the government to replicate the program among loans held by Fannie Mae and Freddie Mac, which bought loans from IndyMac, Washington Mutual and many other banks as part of their official role in supporting the housing market.

Such efforts have the backing of the committee’s chairman, Rep. Barney Frank, Massachusetts Democrat.

“We will be urging others to follow your model,” Mr. Frank told Ms. Bair. “I think you are setting a very good example here.”

More than 1,200 homeowners with mortgages from failed IndyMac Bank are participating in the agency’s effort to refinance the loans and stem the tide of foreclosures - a number is expected to rise dramatically.

There are concerns on the FDIC might get saddled with an even bigger problem: Washington Mutual Inc., the nation’s largest savings and loan.

To avoid that, the government has been reaching out to large banks in an effort to organize a buyout of the beleaguered lender, according to a person briefed on the talks between regulators and banks.

Shares of Washington Mutual have plummeted in recent weeks amid continued concerns about mounting losses in the bank’s lending portfolios. The lender lost $3.33 billion in the second quarter and set aside more than $8 billion to cover souring loans.

Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide