Regulators Offer Capital Injection Guidance

Banks receiving capital injections and other financial support from the federal government should make credit available to their customers and adopt loan modification programs to prevent foreclosures, according to federal banking regulators. "At this critical time, it is imperative that all banking organizations and their regulators work together to ensure the needs of creditworthy borrowers are met," the regulators say in a joint statement. The interagency statement also stresses that lenders and servicers adopt "systematic, proactive and streamlined" loan modification protocols. "Supervisors will fully support banking organizations as they work to implement effective and sound loan modification programs," the regulators say. One recipient of a capital injection, Webster Financial Corp., Waterbury, Conn., said its national bank subsidiary has temporarily suspended foreclosure activity for 90 days. "During these challenging economic times, we feel a heightened responsibility to assist those who are under financial pressure and are threatened with the possibility of losing their homes," Webster chairman and chief executive James Smith said.