At a hearing on Capitol Hill on Wednesday, House Financial Services Committee Chairman Barney Frank [D-Mass.] said he wants to see legislation that will force mortgage servicing companies to better help struggling homeowners.
“We are getting some progress where the loans are owned in a definable way,” Frank said, highlighting the recent actions taken by JPMorgan Chase (JPM) and Bank of America (BAC) to modify their distressed home loans. “But where we have servicers administering the securities we apparently have a problem.”
The Committee’s hearing began with opening remarks from Rep. Paul E. Kanjorski [D-Pa.], who said the situation “is not a partisan one” and that involved parties need to work together to come to a solution.
“Pointing fingers about which borrowers irresponsibly took out loans they could not afford and which lenders recklessly doled out money to unqualified borrowers do absolutely nothing to solve the problem,” he said.
Testifying at the hearing were Benjamin Allensworth, senior legal counsel at Managed Funds Association; Thomas Deutsch, deputy executive director at American Securitization Forum; Michael Gross, managing director of loan administration loss mitigation at Bank of America; and Molly Sheehan, senior vice president in JPMorgan Chase’s home lending division.
The Committee’s hearing was announced by Frank in late October after he and other congressional members were outraged to hear that two hedge funds, Greenwich Financial Services and Braddock Financial Corporation, had encouraged servicers of their mortgages not to participate in the mortgage modification services offered under the Bush administration’s Hope for Homeowners program.
Under the program, distressed borrowers can refinance their mortgages into fixed rate 30-year loans, with voluntary modifications that could include interest rate reductions and writedowns in mortgage balances. Frank’s panel believes legal contracts between mortgage servicing companies and their investors in mortgage-backed securities are blocking these loan modifications from happening.
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