Congresswoman Waters Calls for Comprehensive Approach Beyond Help for Citigroup; Supports Vast Loan Modification Program

Following reports that the federal government has agreed on a rescue plan for Citigroup that would include the bank putting in place a loan modification plan developed by the Federal Deposit Insurance Corporation (FDIC), Congresswoman Maxine Waters (D-CA) renewed her call for a more comprehensive approach to loan modifications involving all lending institutions.

"We must do more and act quickly to prevent foreclosures, and the best way to do this is a comprehensive plan to help homeowners modify their loans.  I continue to believe that the approach developed by FDIC Chairwoman Sheila Bair for IndyMac and now part of the proposed rescue of Citigroup should be implemented by all lending institutions.  Millions of American homeowners whose mortgages were issued and are held by other banks are at risk of losing their homes.  Any future plans to assist banks should be conditioned on implementing a loan modification plan like the FDIC's," said Congresswoman Waters, who chairs the Financial Services Subcommittee on Housing and Community Opportunity.

Loan modifications allow homeowners to make more affordable payments so they can remain in their homes.  Modifications might take the form of lower interest rates, an extended payment term or forbearance of the loan's principal.

The FDIC loan modification plan requires loan servicers to undertake a systematic review of all of the loans under their management and to modify all loans that are determined suitable for modification based on a standard formula.   The plan calls for paying loan servicers $1,000 to cover expenses for each loan modified and sharing up to 50% of losses incurred if a modified loan subsequently re-defaults.

The FDIC estimates that implementing its loan modification program systematically could result in 2.2 million loan modifications – about half of the 4.4 million problem loans (those already 60 days or more past due and those projected to become delinquent by the end of 2099) – and prevent almost 1.5 million foreclosures.

"We know that loan modifications work to help homeowners keep their homes.  In order to stem the foreclosure crisis which is hurting neighborhoods and entire communities, we need to adopt a systematic loan modification program.  Strengthening the housing market is the key to recovering from the financial crisis and stabilizing our nation's economy," Congresswoman Waters said.
 

###