|James Lockhart says the mortgage industry is eager to have a set loan modification standard. (Jonathan Ernst/Reuters)|
Mortgage subsidy called possible
Goal would be to avert foreclosures
WASHINGTON - The Obama administration is hammering out a program to subsidize mortgages in a new front to fight the credit crisis, sources familiar with the plan told Reuters yesterday.
In a major break from existing aid programs, the plan under consideration would seek to help homeowners before they fall into arrears on their loans. Current programs only assist borrowers who are already delinquent.
Under the evolving plan, sources said, homes would undergo a standardized reappraisal and homeowners would face a uniform eligibility test.
The administration may also lower the trigger level that decides who would be eligible for relief. Under an existing program, loans are reworked if a borrower is spending more than 38 percent of their gross income on their mortgage.
In an interview, James Lockhart, the regulator who oversees government-controlled mortgage finance companies Fannie Mae and Freddie Mac, said the industry was eager to have a set loan modification standard.
"I've talked to all the major servicers - both the big bank ones and the big independent ones - and they are all ready to go, they're chomping at the bit," said Lockhart, the director of the Federal Housing Finance Agency. "The other thing they're asking for [is] standardization."
However, he declined to speculate on any plans the administration may be considering. The Treasury Department, which is taking the lead role in financial rescue efforts, did not respond to a request for comment.
Treasury Secretary Timothy Geithner said yesterday the administration would soon put a housing program in place that uses "a mix of incentive and persuasion" to get mortgage companies to rewrite loans.
"The key elements of the strategy are going to bring mortgage interest rates down to help avoid the foreclosures that we can reasonably expect to avoid," he said.