Awaiting Treasury, Banks Stall Foreclosures

Photo: Jeff Turner

As precious few details emerge from the Treasury department on the $50 billion housing rescue plan, the big banks are temporarily halting foreclosures.

J.P. Morgan Chase announced today that through March 6, “we will not add to the foreclosure process any new owner-occupied residential loans that are owned and serviced by JP Morgan Chase.”

Citigroup CEO Vikram Pandit committed to do the same on Wednesday, before the House Financial Services Committee, and issued this release today, extending its moratorium through March 12.

“Today’s announcement expands on Citi’s current foreclosure moratorium in which Citi does not initiate or complete a foreclosure sale on any eligible borrower where Citi owns the mortgage, the borrower is seeking to stay in the home, which is his or her primary residence, is working in good faith with Citi and has sufficient income for affordable mortgage payments.”

I would note, JP Morgan says it will halt on loans owned AND serviced by them, but Citi's is only on Citi-owned loans. As we say over and over, one of the biggest impediments to foreclosure mitigation is the fact that so many loans are owned by outside investors.

As for any new details on the Geithner plan, supposedly nobody except a precious few at the Treasury can expand on yesterday’s little leak that it would involve some kind of standardized modification process that the government would subsidize.

But on top of all that buzz, came an announcement today from the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS). You may remember these are the folks who issued that report in December on the redefault rate of loan modifications (upwards of 50-60 percent!) that set everyone buzzing. Well, because of all that buzz, they are now expanding their data.

I gave a call over to John Dugan, Director of the OCC: “I’m hopeful that the numbers we collected already and the numbers we collect in the future will help this going forward,” said Dugan.

The next report, in March, will break down into categories the loan modifications that,

  • Increased borrowers’ monthly principal and interest payments
  • Brought no change to payments
  • Reduced payments by 10 percent or less
  • Reduced payments by 10 percent or more

“We’ll then take those new categories and for each one figure out what was the redefault rate in each of those categories,” Dugan explained. This of course would be wildly helpful to anyone crafting a massive mortgage modification plan, but unfortunately Mr. Geithner won’t get those stats until well after he’s announced the plan. Dugan, however, assured, “I know for a fact they’re taking that [redefaults] into serious consideration.”

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