Paulson says not enough struggling borrowers seeking loan modifications

Paulson says not enough struggling borrowers seeking loan modifications

	Published : Wed, 31 Oct 2007 20:18 By : Agencies Print this Story

WASHINGTON (Thomson Financial) - Treasury Secretary Henry Paulson acknowledged today that not enough troubled borrowers are asking their lenders to modify their mortgage loans, but said a coalition of lenders will take steps early next month to correct this problem.

Paulson said members of a coalition of mortgage servicers, counselors and industry trade organizations will send a letter on November 19 that will invite all struggling borrowers to call in and start the process of examining whether their loan can be restructured in a way that allows them to stay in their homes.

'Most of the servicers have aggressive programs underway to reach borrowers who are having trouble paying their mortgages,' Paulson said. 'But they are finding that the response rate isn't high enough.'

Many congressional Democrats have argued that while the Bush administration has promoted the industry-led 'Hope Now' coalition, it has not resulted in a significant increase in arrangements that allow borrowers to make their payment structure more manageable. Paulson said today he would call on members of Congress to highlight the letter once it is released.

Paulson also reiterated that improving outreach efforts to borrowers is a critical goal, as is the process of analyzing which loans make sense to restructure as part of an effort to avoid 'preventable foreclosures.' On that second issue, Paulson said members of the coalition are working on ways to determine which loans should be modified based on the ability of borrowers to pay, and which should not.

'For example, borrowers who are current on payments at the lower [interest] rate might be candidates for fast tracking into a refinance or a loan modification,' Paulson said. 'Others who struggled even with payments at the teaser rate may not have these options.'

More generally, Paulson reiterated that the housing crisis is still unfolding, and said resetting adjustable rate mortgages will take place over the next 18 months, which could lead to more foreclosures.

He also said today's report of a 3.9 pct increase in GDP in the third quarter reinforces his belief that 'we have a healthy, diversified economy that will continue to grow.'

pete.kasperowicz@thomson.com

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