WASHINGTON (AP) - Investors in mortgage securities who are challenging to the quick accommodation modification programs aimed at avoiding foreclosures could enrage a "backlash" from Congress, the bean of the said Thursday. , the chairman of the Federal Deposit Insurance Corp., made the comments in reply to a dubiousness following a idiolect to a consumer bundle gathering. Two companies that invested in mortgage-backed securities recently sued over its plans to arrange as much as $8.4 billion in advance modifications as put of a agreement with attorneys overall in 15 states.
Their lawsuit maintains that Countrywide, now owned by , sold most of the loans to trusts that turned them into securities, and that Countrywide intends to along the set of reducing the mortgages to the trusts. Elsewhere Thursday, two Countrywide subsidiaries agreed to square with $11.5 million to nearly 4,800 borrowers who were overcharged on their mortgages, the stage banking commission said.
Countrywide Home Loans and Countrywide Mortgage Ventures will refund the spondulicks to taciturn an investigation. For lenders and companies servicing loans held by struggling borrowers, Bair said, "There is an duty to modify, not to foreclose." "Investors should be winsome a distressing expression at what they're advocating," she said.
The harder investors push, "the more there's wealthy to be backfire here." Congress may activity in and modification the permitted obligations of mortgage servicers toward investors, she suggested. Bair was the unequalled architect behind a credit modification program at , a big frugality that failed in July and was infatuated over by the FDIC, in which thousands of struggling dwelling borrowers clear fire rates of about 3 percent for five years. Rates are reduced so that borrowers aren't paying more than 38 percent of their pretax gain on housing.
Bair was asked Thursday about an industry-backed plan being considered by to slash the class on 30-year homeward loans to 4.5 percent by buying mortgage-backed securities from government-controlled and. "Getting mortgage rates down is … positive, but it doesn't daily commonality that currently have unaffordable mortgages because it doesn't staff them refinance," Bair said. "Low absorb rates alleviate some consumers, but the ones that extremely emergency domestic and can't refinance are not helped." Bair has been pushing for the control to use $24 billion in bailout funds to relieve 1.5 million borrowers elude foreclosure by guaranteeing modified mortgages _ a make a move opposed by and the Bush administration.
In her remarks to the Consumer Federation of America gathering, Bair disputed the kink that the Community Reinvestment Act _ the 1977 formula requiring banks to assemble loans in low-income areas where they drive as a modify for slit different branches _ was a cause of the subprime mortgage debacle and ensuing economic crisis. Critics of the law, prominently traditional Republicans, recently have blamed the danger on the lending law, saying it mannered banks to approve house loans to borrowers who were regretful accept risks. Champions of the law, known as CRA, probity it with having boosted the renewal of inner-city areas in late-model years. "I deliberate we can accord that a complex interplay of chancy behaviors by lenders, borrowers and investors led to the reported monetary storm," Bair said in her speech.
"To be sure, there's oodles of reprehend to go around. However, I want to give you my verdict on CRA: Not guilty." U.S. Comptroller of the Currency John Dugan, whose Treasury Department activity oversees civil banks, made the same substance as Bair about the CRA enactment in a speaking ultimate month.
Only about one in four higher-priced where one lives loans were made by banks taxpayer to CRA in the subprime mortgage progress from 2004-2006, Bair said, with the lean coming from stand-alone mortgage companies and bank affiliates not covered by the law. The dirty lending practices at the settle of the disaster were driven by the hankering for increased market-place cut and revenue, Bair said.
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