With the health of the nation's economy looking more uncertain by the day and rapidly growing numbers of homeowners in danger of losing their houses, this is no time for lenders, servicers and investors to dawdle. That was the message delivered on three occasions – by three separate senior government officials – in the last few days.
Randall S. Kroszner, a member of the Board of Governors of the Federal Reserve, was the first to crack the loan-workout whip.
During his remarks titled ‘Protecting Homeowners and Sustaining Home Ownership,’ which he delivered at both the American Securitization Forum (ASF) 2008 Conference and the Women in Housing and Finance Subprime Symposium, Kroszner praised ‘streamlined systematic approaches’ developed by the ASF and the HOPE NOW alliance to accelerate the production of loan refinances and modifications.
‘I strongly encourage market participants to adopt and to implement these fast-track modifications as quickly as possible,’ he stated, according to a transcript on the Fed's Web site.
Speed is especially of the essence for loan servicers, who were instructed to ‘undertake the investment to overcome the capacity challenges’ associated with increased borrower-contact workloads and reporting requirements.
The next prodding came from Robert K. Steel, Under Secretary for Domestic Finance within the U.S. Department of the Treasury. Also at the ASF conference, Steel began his comments by – not unexpectedly – praising innovations and developments in the capital markets in recent years, as well as patiently acknowledging the difficulty of the current era.
‘Housing corrections take time, and we are currently experiencing a period of adjustment in the housing sector of our economy,’ he affirmed, according to a transcript of his comments posted on the Dept. of the Treasury's Web site. ‘After years of unsustainable home price appreciation and relaxed lending prices, a housing correction was inevitable and necessary.’
But citing both statistics on foreclosure starts and milestones from the HOPE NOW alliance, Steel then zeroed in on the third aspect of Treasury Secretary Henry Paulson's homeowner relief plan: ‘to increase the speed and efficiency of movingâ�¦at-risk borrowers into affordable solutions.’
‘Early data indicate that progress is being made, but your industry must move even faster,’ he urged the crowd. Once again, servicers in particular were called upon to put the pedal to the metal – and take a look in the rearview mirror.
‘We are monitoring servicers closely and expect all to report results of their efforts into HOPE NOW on a monthly basis,’ added Steel.
Finally, for good measure, Paulson himself delivered perhaps the most candid and emphatic call for faster loan workouts.
Thomson Financial News reported that during questioning at a Senate Budget Committee hearing earlier this week, Paulson declared that if mortgage industry participants fail to work their hardest on aiding borrowers, he will not hesitate to point out the shortcomings: ‘I'm gonna be all over them,’ he said.
Consider yourselves warned.
–Jessica Lillian, Commercial Mortgage Insight
