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FOR RELEASE April 17, 2007
For more information contact Bruce Hahn, 571-214-1013
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American Homeowners Laud GSE and Federal Regulator’s Mortgage
Workout Efforts
The challenge is now in Congress’s Court, Homeowners Group tells
House Financial Services Committee
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The American Homeowners
Grassroots Alliance (AHGA) praised Government Sponsored Enterprise (GSE)
giants Fannie Mae and Freddie Mac as well as federal regulators for
their positive and timely announcements of positive steps to address the
looming mortgage crisis. In its April 17 House Financial Services
Committee testimony AHGA also called for immediate action by Congress to
address the crisis, which could spread beyond subprime borrowers and
threaten the entire economy, according to AHGA President Bruce Hahn.
The hearing sought recommendations to help reduce the rising number of
mortgage foreclosures. A record number of borrowers with subprime loans
entered foreclosure in the fourth quarter of 2006. As many as 1.5
million homeowners have adjustable-rate mortgages (ARMS) that will
require substantially higher monthly payments when the adjustment kicks
in 2007 and 2008.
In their House Financial Services Committee testimony the GSEs announced
that they will alter or offer new loan products so that lenders can
qualify more high-risk borrowers for refinancing. They are targeting
adjustable-rate mortgages, especially those held by subprime borrowers.
Fannie Mae’s HomeStay program would allow participating lenders to
refinance homes without first having to resolve borrowers' credit
problems. They will also allow refinancing into 40 year fixed rate
mortgages, which have monthly payments that are about 5% less than
comparable 30 year mortgages. This summer Freddie Mac will offer 30 and
40 year mortgages with reduced margins and longer fixed-rate periods for
subprime borrowers. These loans are expected to be in the market in the
summer.
The Federal Reserve, the Federal Deposit Insurance Corp., the Office of
Thrift Supervision and the Office of the Comptroller of the Currency
agencies issued a April 17 statement encouraging “financial institutions
to consider prudent workout arrangements that increase the potential for
financially stressed residential borrowers to keep their homes." Many
lenders are already offering workouts to borrowers unable to keep up
with escalated payments, but some lenders have cited challenges such as
restrictions on mortgages packaged into bonds that forbid lenders from
contacting borrowers unless they are at least 30 days late on their
payments. The regulators’ statement advised lenders that they “will not
penalize financial institutions that pursue reasonable workout
arrangements."
These timely announcements by the GSE’s and Federal Regulators have set
a good example for Congress. As the AHGA President said in his testimony
“We cannot stress strongly enough that time is of the essence. Any
legislation that takes the rest of this first session of Congress and
most of the next session to enact will be too late to do any good.” The
AHGA testimony included a number of specific legislative recommendations
that will complement the efforts of the GSEs, federal regulators, and
mortgage lenders.
AHGA’s complete testimony is at
www.AmericanHomeowners.org
The American Homeowners Grassroots Alliance is a nonprofit consumer
advocacy organization dedicated to assisting homeowners better
understand the significant economic issues affecting their home and
their lifestyle, and empowering them to make their voices heard by state
and federal officials.
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