Members of Congress pushed the Bush administration on Friday to accelerate efforts to stem a rising tide of home foreclosures.
House Financial Services Committee Chairman Barney Frank and other Democrats on the panel told administration officials time was critical, given statistics showing that 2 million subprime mortgages will reset in coming months at much higher monthly payments, greatly raising the risks of defaults.
“Speed is important,” said Frank, D-Mass. “Time is of the essence.”
Frank questioned why the administration was not backing a proposal made by Shelia Bair, head of the Federal Deposit Insurance Corp., that mortgage companies consider doing broadbased conversions of adjustable-rate mortgages to fixed-rate loans if the borrowers are current on their payments and living in their homes.
Treasury Undersecretary Robert K. Steel, the administration’s point person on the mortgage crisis, said the administration could see benefits in a broader approach to speed refinancings and said the idea was being reviewed. But he stopped short of specifically endorsing Bair’s approach.
Rep. Gwen Moore, D-Wis., said that she was troubled that mortgage lenders were moving too slowly to reach out to at-risk borrowers to start the process of refinancing mortgages.
“What are you doing to use the bully pulpit to get institutions more on board to stop these foreclosures,” she asked.
Steel and Brian D. Montgomery, an assistant secretary of Housing and Urban Development who heads the Federal Housing Administration, said the government and industry groups have stepped up mass mailings, increased advertising and expanded toll-free telephone hotlines to provide assistance.
Steel said that 200,000 letters were going out this month to homeowners in jeopardy of foreclosure through an industry alliance known as HOPE NOW and this would be just the start of an aggressive outreach effort. He said that the administration was working “flat out” to deal with the crisis.
Many Democrats, however, have been highly critical of the administration’s efforts, contending that they are too dependent on the industry and offer too little in terms of government assistance to stem the number of foreclosures in the coming two years.
But Steel disagreed, saying that Treasury Secretary Henry Paulson and other officials were devoting a large amount of time to dealing with the mortgage problems, which Paulson has said is the biggest threat to the economy at present.
“Under the president’s leadership, the administration is working diligently to help mitigate the impact of rising foreclosures on homeowners and the economy,” Steel said.
While the government reported Wednesday that the overall economy surged ahead at an annual rate of 3.9 percent in the July-September quarter, economists believe that the steepest downturn in housing in more than two decades, which has Wall Street worried because of lingering credit problems, will cut economic growth by half in the current quarter, raising concerns about a possible recession.
Estimates are that mortgage defaults could rise to 2 million or more in the coming two years in the subprime mortgage market, loans provided to borrowers with weak credit histories. Those loans are now resetting from low introductory rates to much higher rates which can add as much as $250 to $300 to the typical monthly mortgage payment.
Iowa Attorney General Tom Miller told the committee that his panel was working to adopt an approach for the current home mortgage crisis that would duplicate efforts in the 1980s to allow farmers to avert threatened foreclosure on their farms.