Major Mortgage Players Pledge Foreclosure Relief; May Alleviate Fallout by Kenneth R. Harney
With major mortgage market players pledging new relief plans for financially-strapped subprime homeowners, the foreclosure fallout this year and next may not be as severe as some real estate analysts had forecast. Chief economists from the National Association of Home Builders and Freddie Mac have cited a potential rise in foreclosed homes as a drag on home sales in the coming months. Freddie Mac chief economist, Frank Nothaft, said in a recent commentary that unknown numbers of "foreclosures may dump new supplies of (unsold houses) onto already-depressed local markets, intensifying the downward price pressure in those areas." But last week on Capitol Hill and elsewhere, some of the biggest institutions in American home real estate promised new programs to stem the subprime foreclosure tide. Freddie Mac told a Senate foreclosure-avoidance summit last Wednesday that it planned to devote $20 billion to help refinance subprime buyers facing unaffordable payment adjustments or foreclosure into fixed rate conventional loans. Fannie Mae earlier had announced a new refinancing program of yet-undetermined dollar volume to reach out to ailing subprime borrowers with adjustable rates on the rise. The congressionally-chartered company said that as many as 1.5 million homeowners facing payment shocks may be eligible for Fannie refis into more favorable loans. Washington Mutual announced last week that it would refinance up to $2 billion worth of subprime adjustables into 30-year fixed rate loans, and cut one half percentage point off its regular fixed rates to make the deals more affordable. Citigroup also announced a subprime refi relief program, and the Federal Housing Administration told Congress it would do whatever possible to accommodate distressed subprime homeowners in its regular insured fixed-rate programs. FHA's rates typically are 3 percentage points or more lower than subprime rates. At the same time, FHA commissioner Brian Montgomery told a House Financial Services committee hearing that his agency needs Congress to approve "modernization" legislation before it can most effectively help out subprime borrowers. Among the key changes that would give the agency broader clout, he said, are higher loan limits in high cost areas such as California and the Northeast, where FHA currently funds few mortgages because of statutory restrictions. Fannie's and Freddie's announcements drew the praise of key housing legislators, including House Financial Services chairman Rep. Barney Frank (D-Mass), who said their ability and willingness to take on such programs fulfilled part of their public purpose. Senate banking committee chairman Sen. Chris Dodd (D-Del) held a federal-private "summit" Wednesday bringing together top federal regulators and private mortgage industry leaders. Dodd said the strong interest and commitments from the private sector to assist subprime borrowers makes a major federal "bailout" effort unnecessary. He specifically ruled out a controversial proposal by his committee colleague, Sen. Charles Schumer (D-NY) which would involve distributing "hundreds of millions of dollars" of federal aid to nonprofit and community-based housing counseling organizations around the country for use in assisting foreclosure-endangered subprime borrowers. "I'm not interested," said Dodd. | 
