Home / News / Foreclosure / Bair Defends HAMP, Voices Support for Principal Write-Downs
Print This Post Print This Post

Bair Defends HAMP, Voices Support for Principal Write-Downs

FDIC Chairman Sheila Bair â€" a recognized champion of homeownership preservation whose loan modification model has set the standard for the industry â€" is throwing her support behind the administration's Home Affordable Modification Program (HAMP).


In remarks made at the Multicultural Real Estate and Policy Conference in Washington, D.C. Thursday, Bair called HAMP ""the most ambitious mortgage modification effort ever undertaken.""

She dismissed charges made by lawmakers and other market observers that HAMP has failed, noting that ""it's still too soon to know how successful it will ultimately be.""

The FDIC chairman said, ""It is true that the numbers of trial and permanent modifications have lagged behind program projections. But at the same time, we saw a slowdown in the pace of new foreclosures in the second half of last year.""

Bair says this suggests servicers are at least looking for alternatives that could minimize their losses and keep people in their homes.

She noted that in order to develop effective policies, the White House and regulators must recognize the evolving nature of the mortgage problem. She explained that the initial phases of the crisis involved poorly structured mortgages that posed an affordability problem, but now it's underwater mortgages that pose the biggest threat.

""That's why we're actively looking at principal write-downs within our loss share agreements and other failed bank programs,"" Bair said. ""We see this as one possible way to encourage borrowers to stick with their mortgages. This could help reduce defaults, keep people in their homes, avoid costly foreclosures, and enhance the value of these loans.""

Bair continued, ""We understand that this will not be the solution for every distressed borrower. And we are approaching this issue strictly by the numbers. But the fact is that deeply underwater mortgages â€" those with loan-to-value ratios of 150 percent or more â€" are very likely to default.""

According to Bair, models show that the odds of default can be greatly reduced if the loan-to-value (LTV) ratio can be brought down a level closer to 100 percent.

""This approach can help mortgage owners cut their losses by avoiding foreclosure costs,"" Bair said. ""Our analysis is ongoing. But I'm committed to doing everything possible along these lines to reduce our resolution costs, minimize foreclosures, and help to stabilize our housing markets.""

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.

Check Also

Enforcement Actions Taken Against 400 MLOs Over SAFE Act Violations

State regulators have reached a settlement with 400 mortgage loan originators who falsely claimed to have completed their SAFE Act-mandated education requirements.

Your Daily Dose of DS News

Get the news you need, when you need it. Subscribe to the Daily Dose of DS News to receive each day’s most important default servicing news and market information, absolutely free of charge.