Treasury Secretary Henry Paulson Jumps Into The Mortgage Mess
Monday, December 03, 2007SUSIE GHARIB: Treasury Secretary Henry Paulson today took aim at an avalanche of home foreclosures expected over the next year. Speaking at a housing conference in Washington, Paulson pressed the mortgage lending industry to come up with a process to help struggling borrowers stay in their homes. As Stephanie Dhue reports, the Treasury secretary thinks regulators and lenders can agree on a plan this week.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Losing patience with rising foreclosures, Treasury Secretary Paulson is urging lenders to set standards to quickly reprocess troubled loans. But he acknowledged the current industry effort, called Hope Now, isn't a complete solution.
HENRY PAULSON, TREASURY SECRETARY: Nothing is worse than doing nothing. The hope Now effort to streamline refinancings and modifications is a positive step, but it is not a silver bullet.
DHUE: The modification plan focuses on borrowers who have been making payments, but who will no longer be able to afford their mortgages once the interest rates reset. But analysts say mortgage workouts will only have a modest impact on rising foreclosures and falling home prices.
FREDERICK CANNON, MANAGING DIR., KEEFE, BRUYETTE & WOODS: It's a pretty narrow segment of people who can really be helped by these loan modifications and the issues that we face in housing today in terms of the impact of lower home prices and the impact on mortgages and mortgage lending generally are going to be with us for quite some time.
DHUE: Countrywide CEO Angelo Mozillo says his firm will modify 75,000 sub-prime loans by the end of the year. That's about 10 percent of the sub-prime loans on its books. He wants the government to do more to jump start the market for mortgage-backed securities.
ANGELO MOZILLO, CEO, COUNTRYWIDE: Holders of those securities who got screwed are going to say, I'm not going to do this again. Something is going to have to happen to give them confidence to go back and take in mortgage-backed securities.
DHUE: Mozillo called on regulators to let Fannie Mae and Freddie Mac purchase more loans in greater amounts. But homebuilder Robert Toll suggests regulators need to reassert themselves in the mortgage market.
ROBERT TOLL, CHAIRMAN & CEO, TOLL BROTHERS: If you're going to have the secondary market back mortgages, you're going to have to make those mortgages more sound. You can't wish for the market to reassert itself. You can't wish, respectfully, for the providers to worry about their reputation.
DHUE: Many economists now expect home prices to continue to decline for the next year and until home prices reach a bottom, they say the market for mortgage-backed securities will also struggle to find its footing. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
