FDIC Chief Warns Servicers to Pick Up Pace

FDIC Chairman Sheila Bair is warning mortgage servicers that the government might have to "step in" if they don't pick up the pace in making loan modifications and show more progress in preventing foreclosures. "I very much believe in the market," the Federal Deposit Insurance Corp. chairman told a Bear Stearns mortgage conference. "But if market solutions fail to solve the problem, government will step in." The FDIC chairman made her remarks after Hope Now servicers reported that they modified 12,700 adjustable-rate subprime mortgages during the third quarter. And they relied on repayment plans to deal with another 90,500 delinquent subprime borrowers. The Mortgage Bankers Association issued the workout report. Treasury Secretary Henry Paulson said the report shows Hope Now alliance's potential to help more homeowners stay in their homes and prevent a market failure. "I look forward to seeing regular progress reports from the organization in the coming months, as servicers implement the streamlined modification and refinancing plan announced in December," Mr. Paulson said.