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Fed National mortgage servicing standards should be considered
WASHINGTON (12/2/10)--A national set of standards for mortgage servicers should be considered as a response to past and present mortgage industry issues, Federal Reserve Board Governor Daniel Tarullo said on Wednesday. Tarullo spoke before a Wednesday Senate Banking Committee hearing entitled "Problems in Mortgage Servicing From Modification to Foreclosure." Treasury official Phyllis Caldwell, Federal Deposit Insurance Corp. Chairman Sheila Bair, acting Federal Housing Finance Agency Director Edward DeMarco, and acting Comptroller of the Currency John Walsh also testified during the hearing. Overall, Tarullo said, “broader solutions are needed both to address structural problems in the mortgage servicing industry and to accelerate the pace of mortgage modifications or other loss mitigation efforts. Tarullo also called on both the U.S. Government and the broader finance industry to pay greater attention “to the lagging incidence” of home mortgage modifications. “Homeowners who try to obtain a modification of the terms of their mortgages are all too frequently subject to delay and disappointment, while those who simply stop paying their mortgages have found that they can often stay in their homes rent free for a time before the foreclosure process moves ahead. Moreover, many homeowners believe, reportedly on the basis of communications from servicers, that the only way they can qualify for modifications is by stopping their mortgage payments and thus becoming delinquent,” Tarullo added. “The dominance of foreclosures over modifications raises macroeconomic concerns,” Tarullo said, adding that foreclosures are costly to all concerned parties and “can delay a recovery in housing markets and the broader economy.” Caldwell also called for mortgage servicers to “increase efforts in helping borrowers avoid foreclosure through modification, as well as other alternatives to foreclosure, such as short sales.” More than 1.3 million of the 30 million mortgages guaranteed by Fannie Mae and Freddie Mac “are more than 90 days seriously delinquent,” according to DeMarco.
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