No Federal Bailout for B&C
The chairman of the Senate Banking Committee and the ranking Republican member last month ruled out any type of government bailout for delinquent subprime borrowers.
But while the senators made their proclamation at a news conference here, Fannie Mae and Freddie Mac pledged billions of dollars in resources to help subprime borrowers who are behind in their payments or soon may be.
Freddie committed $20 billion to refinancing troubled subprime borrowers, with Fannie saying it might offer assistance on more than 1.5 million loans.
Fannie CEO Daniel Mudd said he could not offer a specific dollar amount at this time but told Mortgage Servicing News the GSE would get the word out to troubled consumers through residential servicers.
Mr. Mudd said the loans in question have average balances of $150,000.
He noted that while some loans should be easy to refi, there is a second group of borrowers who will need "a significant" restructuring and there is a third that "a solution won't work for."
Fannie Mae will relax its underwriting standards to help refinance homeowners who are facing imminent payment shock due to adjustable-rate subprime mortgages.
For borrowers current on their existing ARMs, Fannie will overlook unpaid bills on their credit reports to get them into a safer and more affordable mortgage with a 40-year amortization period if necessary. (Fannie is calling this its "HomeStay" initiative.)
Freddie, meanwhile, is speeding up delivery of a new suite of subprime products and plans to offer more stable financing alternatives to subprime borrowers. The products should be ready by midsummer.
The new products may include 30- and 40-year FRMs, and ARMs with reduced margins and longer fixed-rate periods, Freddie chairman and chief executive Richard Syron said.
Originally, Freddie was not expected to introduce these subprime products until September.
Chairman Syron also said modifications to Freddie's existing "Home Possible" products are in the works to provide subprime borrowers with additional financing options.
Home Possible provides high loan-to-value ratio loans to borrowers with less-than-stellar credit.
At the press conference last week, Senate Banking Committee chairman Chris Dodd, D-Conn., said, "This problem can be solved without using" taxpayer money.
Sen. Richard Shelby, R-Ala., said, "I'd be unalterably opposed" to a government bailout. (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com