Democratic presidential candidate Hillary Clinton urged mortgage lenders to observe a 90-day moratorium on subprime foreclosures to give financially troubled borrowers time to work with lenders to avoid losing their homes.
Charlie Neibergall
Secretary of State Hillary Rodham Clinton (AP Photo/Charlie Neibergall)
In a speech in New York, Sen. Clinton also called on Wall Street and the mortgage industry to support voluntarily her proposals to freeze for at least five years the monthly interest rate on subprime mortgages, which are extended to borrowers with spotty credit.
If Wall Street did not voluntarily support her efforts, Clinton said she would consider legislation that would give legal protection to mortgage servicers and others who work with borrowers to modify their mortgages.
Clinton said Wall Street was partly to blame for the subprime mortgage mess and urged the investment community to support her proposals aimed at preventing home loan foreclosures.
Clinton said Wall Street was not solely responsible for the wave of foreclosures that threatens to crimp U.S. economic growth but "certainly had a hand in making it worse."
"Wall Street helped create the foreclosure crisis, and Wall Street needs to help solve it," she said.
Clinton said mortgage lenders and brokers who lowered underwriting standards were also deserving of blame for the housing market mess, as were regulators who failed to provide adequate oversight.
She pinned some of the responsibility for the crisis on ratings agencies for giving high marks to securities later deemed to be much riskier, and on speculators who bought multiple properties in the hope of profiting from a strong housing market.
An estimated 1.8 million U.S. homeowners who took out loans with low teaser rates face pricey loan resets next year alone, the Federal Reserve has said. Officials fear half a million borrowers risk losing their homes.
Rising defaults on subprime loans, aimed at borrowers with a spotty credit history, have spooked financial markets around the globe in recent months, tightening credit conditions and threatening to derail the economy.
Treasury Secretary Henry Paulson has worked closely with an investor trade group -- the American Securitization Forum -- as well as mortgage servicers and lenders to hammer out a comprehensive plan to modify troubled loans.
Many sinking loans had been repackaged as securities and sold to investors, who are having a tough time getting a handle on the value of their assets.