A member of the U.S. government bailout oversight panel says that if bankers and mortgage companies don’t start restructuring mortgages with loan modifications more aggressively it will be mandated by government leaders.
Richard Neiman made the comments visiting Las Vegas to inspect the city’s massive foreclosure epidemic as a member of the panel. Neiman is the Superintendent of New York state banks. As a leading member of the panel, Neiman said he would return to Wall Street and urge bankers to make more loan modifications. “If it’s not done voluntarily,” said Neiman, “it will be mandated.”
Neiman pushed for new legislation on subprime mortgages in the New York Senate. The bill would create protections for mortgage borrowers in distress and provide a basis for preventing problems in the future. Similar proposals are expected to be passed in Congress.
The group was appointed by Congress to oversee the $700 billion bailout of financial institutions. Lenders are making modifications by sometimes adjusting the interest rate, cutting mortgage amounts and extending the terms on some mortgages. But critics say there isn’t enough being done to help ailing homeowners who are dealing with foreclosure.
More than 3.3-million homes have been foreclosed since the mortgage crisis started. An estimated 9,000 homes are being foreclosed daily in the U.S.
The epidemic of foreclosures has triggered the worst financial disaster since the Great Depression. Proponents of loan modifications say that the foreclosure epidemic can at least be curtailed with more aggressive actions by mortgage lenders to modify mortgages.
Another member of the panel said that at least one banking giant isn’t being cooperative to help prevent more foreclosures. Proponents have been critical of banking interests for not caring about those in foreclosure. The financial crisis started on Wall Street and with mortgage lenders, who made loans to just about anyone who wanted a mortgage with little regard to qualifications.
More than 3-million Option A Alternative mortgages and subprime loans are due to reset in 2009 alone, triggering what will be a second wave of foreclosures unless lenders are more aggressive making loan modifications, and take other steps to try and halt the epidemic. More than another million homes could fall into foreclosure in 2010.
Policymakers want lenders to restructure loans providing fixed-rate, 30-year mortgages instead of adjustable rate loans, which are recalculated to raise mortgage payments. The new higher payments are often unaffordable to homeowners and force them into foreclosure.