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Mortgage Crisis: Is Congress Even There To Listen?

Countrywide
Countrywide

I spent the morning listening to a hearing of the House Financial Services Committee about, what else, mortgage issues (I know, I’ve really got to get out more).

After riveting testimony from the Treasury’s Under Secretary for Domestic Finance (sorry, but even he looked bored), regarding the department’s new “Hope Now” alliance, I eagerly awaited the next panel.

I don’t mean that “Hope Now” isn’t important; it’s a big initiative to open up communication between lenders and struggling borrowers. It’s just that I’ve done the press conference announcing it, and the photo-op following it up, and well, you get the picture.

The next panel included two strange bedfellows: Countrywide Financial and NACA, or the Neighborhood Assistance Corporation of America. NACA had been a huge critic of Countrywide, boycotting its local offices and pretty much blaming it for the fall of the housing market.

Anyway, the two are now working together to modify troubled loans in a unique agreement that, in my mind, is fascinating. Bruce Marks, NACA’s chief, told me yesterday that when the Countrywide official asked for a meeting with him to discuss this, he didn’t believe anything like this would ever happen.

I wanted the lawmakers to get a better understanding of this agreement, of the unique circumstances that actually have the investors in these loans willing to forego contracts and modify the products they purchased.

And the fact that Countrywide is willing to spend all this time and manpower modifying the loans, for which they get no additional servicing fee…well the whole thing, to me at least, is an unbelievable example of just how bad all these loans are.

The largest lender and its greatest enemy, sitting side by side, as the lender basically admits that the loans it sold are in deeper trouble than we thought, not to mention the act of modifying them in such a way, is a tacit admission that the loans were bad to begin with. Unfortunately, barely three or four lawmakers actually made it to the hearing. Need I say more?

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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