Bernanke: Servicers Slow to Add Mod Capacity
Washington-Federal Reserve chairman Ben Bernanke criticized residential mortgage servicers for being slow to add "capacity" to their loan modification programs.
Speaking at a Fed conference on housing, Mr. Bernanke said he also backed the idea of giving cash incentives to servicers that engage in loan restructurings.
At press time, new delinquency figures showed that 6.99% of all mortgagors were late on their loans with another 2.97% in foreclosure.
Mr. Bernanke also supports a reduction in the rate being charged to consumers who try to restructure their loans through the Federal Housing Administration's Hope for Homeowners modification program.
"At present, this rate is expected to be quite high, roughly 8%, in part because it is tied to the demand for the relatively illiquid securities issued by Ginnie Mae to fund the program," he said.
The central banker added, "To bring down this rate, the Treasury could exercise its authority to purchase these securities, with the Congress providing the appropriate increase in the debt ceiling to accommodate those purchases. Alternatively, the Congress could decide to subsidize the rate." The H4H program has received little usage. The Fed chairman has nixed the idea of a government-funded insurance program to offer home price supports.