Feds Encourage B&C Workouts Via CRA Credit

Federal regulators are encouraging banks and thrifts to help distressed subprime borrowers through loan modifications and other workout arrangement by awarding Community Reinvestment Act credit."The agencies want to remind their institutions that existing regulatory guidance and accounting standards do not require immediate foreclosure of homes when borrowers fall behind in the payments," an interagency statement said. The statement also points out that the financial institutions are required to inform delinquent borrowers about the availability of homeownership counseling. And the institutions should work with consumer-based organizations that help financially stressed borrowers avoid foreclosure. "Bank and thrift programs that transition low- and moderate-income homeowners from higher-cost loans to lower-cost loans may also receive favorable consideration under CRA," the agencies said.