HUD: Banks Will Be Held Responsible
U.S. Secretary of Housing and Urban Development Shaun Donovan said Wednesday that the onus is on banks to fix whatever foreclosure-related problems are found.
Donovan, who made the statement during a White House briefing about the matter, said problems found thus far haven’t appeared to be very serious, but the full investigation won’t be finished until the end of the year. If more serious problems are found, possible penalties could include fines and a ban against writing mortgages for more serious violations, he added
Bank of America and GMAC Mortgage have ended their foreclosure freeze because they didn’t find significant problems. Donovan said the government wasn’t involved in those decisions.
Source: Dow Jones Business News, Jared A. Favole (10/20/2010)
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Banks Pressured to Fix Foreclosure Problems
Banks are under increasing pressure to fix the foreclosure mess as analysts predict dire consequences and investors sell off bank stocks.
“The nation has been in denial about the scope of the problem, and it’s now just being revealed,” says Janet Tavakoli, founder of Tavakoli Structured Finance Inc., a financial consulting firm. “This is a huge crisis for our country.”
Harvard Law School visiting professor Katherine Porter, who investigated foreclosures in 2007, says lenders should agree to modify loans and avoid lawsuits. “From the beginning, mass modifications would have been better and I still think they’d be cost-saving,” she says.
Principal reductions could lead to “huge losses” for banks, says James Ellman, president of hedge fund Seacliff Capital. “You could potentially be talking about hundreds of billions of dollars in losses.”
Source: Bloomberg, Dakin Campbell and Christine Harper (10/15/2010)
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Banks Plan to Keep Lending Tight
Banks tightened standards for all types of loans in the second quarter, the Federal Reserve reported Monday.
About 35 percent of senior loan officials said they tightened standards somewhat and none of the 51 responding banks said they loosened standards for prime mortgages. The rest said their standards for mortgages remained the same or were substantially stronger.
Banks also told the Fed that they expected to maintain strict lending standards until at least the second half of 2010.
“Most banks have woken up to the fact that there is a lot more risk in their loan books than they ever thought possible,” says Joel Conn, president of Lakeshore Capital LLC in Birmingham, Ala. That has caused many banks to reconsider their requirements for future lending, Conn says.
Source: Bloomberg, Craig Torres (08/17/2009)
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Treasury Pushes Bankers on Loan Modifications
During daylong meetings Tuesday, the Treasury Department pressured executives from 25 mortgage companies to promise to work harder to modify more mortgages for troubled borrowers.
The officials agreed orally on a new goal of 500,000 loan modifications by Nov. 1.
The meeting stemmed from concern that the program to modify mortgages will fall far short of the original goal of 3 to 4 million modified loans. As of this week, only 200,000 borrowers were enrolled in three-month trial loan modifications.
“Today’s meeting was an opportunity to identify ways to accelerate the program and bring relief faster,” Treasury Secretary Timothy Geithner said in a statement.
Bankers who attended the meeting complained that the original announcement of the program led the public to believe that modifications could be accomplished immediately.
“It was very difficult as an industry as a whole to try to live up to those expectations,” said Dan Frahm, a Bank of America spokesman.
Source: The Associated Press, Alan Zibel and Daniel Wagner (07/28/2009)
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