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Industry Responds to Administration's Housing Plan

The response streaming in from leaders and regulators across the banking and mortgage industries is overwhelmingly positive for President Obama's ""Homeowner Affordability and Stability Plan"":http://dsnews.comindex.php/home/news_story/2576 unveiled on Wednesday. The general sentiment is that the announcement represents a huge step forward for the entire country in addressing the massive foreclosures and spiraling housing downturn at the core of the national economic crisis.
Martin Eakes, CEO of the ""Center for Responsible Lending"":http://www.responsiblelending.org, commented that the administration's plan for the housing industry ""represents an essential and overdue investment in correcting the results of bad lending and poor risk management ... providing new hope for a future with stronger communities and a stronger economy.
""Previous actions to bail out banks have been necessary to keep the economy afloat, but essentially amounted to bailing out the water in a leaky ship,"" Eakes said. ""By addressing the foreclosure crisis directly, the administration's housing plan finally begins to plug the holes that cause the problem.""
The multi-pronged plan is expected to help as many as 7 to 9 million homeowners restructure or refinance their mortgages to avoid foreclosure.
Sheila Bair, chairman of the ""Federal Deposit Insurance Company"":http://www.fdic.gov (FDIC), said, ""There will still be some borrowers who lose their homes to foreclosure. Some of that will be inevitable. But this should have a significant reduction in the foreclosure rate, bringing it more in line with historical levels.""
According to an _""Associated Press"":http://www.ap.org_ report, Bair, who appeared on ABC's ""Good Morning America,"" said that as a person making regular mortgage payments herself, she understands the resentment of homeowners with safe loans who feel others are being rewarded for risky behavior. She said, however, that the plan would help many, but not all, and that's appropriate at a time of plunging home prices. ""Is it fair to everyonex Perhaps not,"" Bair said. ""But I think frankly we're beyond that.""
Michael Rubinger, president and CEO of the ""Local Initiatives Support Corporation"":http://www.lisc.org (LISC), said, ""The best news in this package is that we are finally tackling our housing problem straight-on in a thoughtful, serious way. This is something we haven't had thus far, a plan that goes to the root of the current economic crisis.""
LISC, which works to help nonprofit community development corporations revitalize distressed neighborhoods, also said that the decisive steps being taken will help stabilize communities stung by foreclosures, pointing out that particularly in low-income areas, rampant foreclosures lead to increased blight and crime and ""can reverse years of progress"" and ""erase opportunities.""
Shaun Donovan, secretary of the ""Department of Housing and Urban Development"":http://www.hud.gov (HUD), said now that the government has taken such aggressive action against the housing crisis, it's critical for banks and lenders to ""step up to the plate.""
""Bank of America"":http://newsroom.bankofamerica.com/index.phpxs=press_releases&item=8350 issued a statement applauding the government's housing program. Barbara Desoer, president of Bank of America Mortgage, Home Equity, and Insurance Services, said BofA, which implemented a foreclosure moratorium last week in wait of the administration's announcement, would extend that suspension until eligibility details for the loan modification portion of the plan are released - a due date of March 4th is expected for these specifics.
Desoer said, ""We want to ensure that any borrower who has sufficient income and the desire to sustain homeownership has the ability to do so using any and all tools we have available.""
Jamie Dimon, chief executive of ""J.P. Morgan Chase"":http://www.jpmorganchase.com, told the _""Washington Post"":http://www.washingtonpost.com_ that his company would voluntarily participate in the program and that executives at other large banks told him they also plan to participate. ""We have to see the details, but what we see today looks terrific,"" Dimon said in an interview with the _Post_. ""We have been urging the government to have a national modification program for us to follow.""
John A. Courson, president and CEO of the ""Mortgage Bankers Association"":http://www.mortgagebankers.org (MBA) said, that while he is encouraged by the plan's modification and refinancing initiatives, he also sees several areas of concern. In particular, Courson said the new programs offer little help to borrowers whose loans exceed their property value by more than five percent, something that would ""limit the plan's success in some of the hardest hit areas in California, Florida, Nevada, and Arizona, as well as some areas on the East Coast.""
Courson also said that the plan doesn't offer assistance to borrowers with jumbo mortgages and those whose mortgages are in private label securities, and it doesn't provide servicers with a sufficient safe harbor to avoid litigation from investors or mortgage holders for modifications made.
In his announcement of the housing plan, the president added a clear endorsement for allowing judicial principal modifications of home mortgages during bankruptcy for ""borrowers who have run out of options"" -- an action commonly referred to as a ""cram-down"" by lenders.
Commenting on the endorsement, Carey Ebert, a bankruptcy attorney in Ft. Worth, Texas, and president of the ""National Association of Consumer Bankruptcy Attorneys"":http://www.nacba.org (NACBA), said, ""Data released by NACBA and others make it very clear that the foreclosure crisis will not be resolved through top-down voluntary efforts on the part of the financial services industry alone, no matter how many carrots or incentives are given. Judicial mortgage modification cuts through the impediments to sustainable mortgages. Courts must be empowered to implement economically rational loan modifications where the parties are unwilling or unable to do so on their own.""
A California loan modification law firm, ""The Law Office of Barsness & Cohen"":http://www.loanmodificationlosangeles.net, agreed that bankruptcy modifications were necessary because mere interest rate reductions will not be enough to provide a long term solution.
Chris Barsness, Esq. with the firm said, ""We feel that reducing the interest rate or other efforts at loan modification are a step in the right direction to avoid foreclosure; however, this will not help those that hold negative equity in their homes. By allowing bankruptcy judges and forcing lenders to modify the principal owed on a home loan to the home's current fair market value, homeowners would see significantly reduced monthly payments. We understand that this is a sweeping reform, but in these tough economic times, drastic approaches must be taken.""
However, David Kittle, ""MBA"":http://www.mortgagebankers.org chairman, said that his organization was ""disappointed to see the President endorse bankruptcy as a means to help delinquent borrowers. Our fear is that any borrower who can't be helped by this program will have a hard time being helped by bankruptcy.""
To read our full story outlining each component of the Homeowner Affordability and Stability Plan, ""click here"":http://dsnews.comindex.php/home/news_story/2576.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.
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