Senator Feinstein Urges Heads of Six Major Banks to Take Stronger Steps to Help Americans Avoid Foreclosure
Apr 25 2008
Washington, DC – U.S. Senator Dianne Feinstein (D-Calif.) is urging the chief executives of six major banks to take more robust action to help American homeowners avoid foreclosure.
In a letter to the bank executives, Senator Feinstein noted the broad economic damage caused when Americans lose their homes. Just this week, DataQuick Information Systems reported that in California, repossessions of foreclosed homes in the first quarter of 2008 were up 327 percent over the same period last year (47,171 repossessions this year vs. 11,032 in the first quarter of 2007).
“Foreclosures are in the best interest of no one,” Senator Feinstein wrote. “Neighborhoods are decimated when homes are repossessed or left vacant, property values decline, local economies suffer, and crime often increases in blighted areas.”
The letter was sent to Kenneth Lewis, Chairman and CEO of Bank of America; Vikram S. Pandit, CEO of Citigroup; Michael Geoghegan, Group Chief Executive of HSBC Holdings; James Dimon, Chairman and CEO of JPMorgan Chase; Kerry K. Killinger, Chairman and CEO of Washington Mutual; and John G. Stumpf, President and CEO of Wells Fargo.
These are the largest banks participating in the HOPE NOW Alliance, a consortium of lenders involved in outreach efforts to homeowners at risk of foreclosure.
In her letter, Senator Feinstein specifically urged the executives to take the following steps:
- Provide a one-time loan modification opportunity to borrowers facing foreclosure on loans serviced by their institutions; and
- Improve early notification procedures for borrowers in danger of losing their homes.
Following is the text of the letters to the bank executives:
April 24, 2008
As the Nation’s foreclosure crisis worsens, it is critical that major lenders demonstrate leadership in developing innovative solutions to prevent families from losing their homes. This is particularly crucial for California, where nearly 500,000 adjustable rate mortgages are due to reset over the next couple of years.
In a report released this week, the State Foreclosure Prevention Working Group noted that seven out of ten homeowners facing foreclosure were not involved in any type of work-out process, despite the increased outreach efforts of lenders. While I support your initiatives to help distressed homeowners, the crisis we face necessitates a more robust approach. I am writing to urge you and other leaders in the industry to quickly take the following steps to restore stability to the mortgage market.
- Provide a one-time loan modification opportunity to all borrowers facing foreclosure on mortgages serviced by your institution, or its subsidiaries. This modification should allow borrowers to transition to a 30-year mortgage at current fixed rates, which are around 6 percent. The opportunity should be limited to mortgages originated within the last five years that are below the current Federal Housing Administration conforming loan limit ($729,750). This would ensure it is targeted only to those most in need, while including individuals in high cost states.
- Improve early notification procedures for borrowers in danger of losing their homes. Borrowers with adjustable rate mortgages should receive notice at least three months prior to their loan resetting that includes an approximation of their new monthly mortgage payment. If borrowers understand how much their payments are scheduled to increase, they can seek help early to prevent mortgage default or foreclosure.
Foreclosures are in the best interest of no one. Neighborhoods are decimated when homes are repossessed or left vacant, property values decline, local economies suffer, and crime often increases in blighted areas. Banks such as yours incur the costs of foreclosure and are left with the burden of reselling the properties. Homeowners are forced to give up on the American dream, and in some cases, tenants are forced out of homes they have been renting.
I believe that in many instances these devastating consequences can be avoided, with solutions that are better for lenders, investors, and homeowners alike. The foreclosure option may be the most readily available, but why should it be utilized when other approaches are better for everyone involved? Providing a limited, one-time mortgage loan modification opportunity would help literally thousands of your customers keep their homes, while providing relief to the distressed housing market and broader U.S. economy.
I look forward to receiving your feedback, and urge you to act quickly. I stand willing to help in any way that I can.
United States Senator