A pickup in loan modifications could be an important factor in keeping the U.S. economy out of recession, according to Mark Zandi, chief economist of Moody's Economy.com.Speaking at a housing forum sponsored by the Office of Thrift Supervision, Mr. Zandi argued that the Federal Reserve Board has to be aggressive in cutting interest rates and said 20% to 30% of adjustable-rate mortgages need to be modified before they reset to give the housing and mortgage markets any chance of a recovery. Countrywide Financial Corp. chairman and chief executive Angelo Mozilo said he supports the Bush administration's effort to increase loan modifications. However, he stressed that the lack of liquidity in the secondary market (except for Fannie Mae, Freddie Mac, and Federal Housing Administration-eligible loans) is putting downward pressure on sales and house prices. Mr. Mozilo called on the administration to relax its grip on Fannie and Freddie so the two mortgage giants can use their resources to "jump-start" the secondary mortgage market and restore investor confidence.
