Facing Foreclosure: Get Your Head Out Of The Sand

Vikram Pandit testifying before House Financial Services Committee
Vikram Pandit testifying before House Financial Services Committee

I'm on Capitol Hill today at the greatest political theater imaginable—sorry the House Financial Services Committee hearing with the CEOs of eight major banks, from Citi to JP Morgan, Bank of America to Goldman Sachs.

Congresswoman Nydia Velazquez askedCitigroupCEO Vikram Pandit why his bank recently came out in support of legislation to allow bankruptcy judges to modify home loans.

His answer was surprising.

He said it was because the law required the borrower to speak to the lender at least ten days before bankruptcy proceedings. In other words, it forces the borrower to get in touch with the lender. He says he believes Citi could save the borrower in those ten days and avert bankruptcy.

He said the biggest impediment to foreclosure mitigation is actually getting the borrower on the phone. He said, "people put their heads in the sand," and added that half of the foreclosures his bank sees are for people they can't reach.

I've heard that before but never in quite that way.

The other CEOs, when asked, refused to support the bankruptcy legislation.

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