Treasury Under Secretary Tells Financial Services of Efforts to Forestall Foreclosures

WASHINGTON -- During a panel of government officials and others testifying before the House Financial Services Committee Nov. 2, Treasury Under Secretary for Domestic Finance Robert K. Steel explained the administration's efforts to help stem the rising tide of foreclosures.

The focus of the hearing was the HOPE NOW initiative, which is an alliance of lenders, servicers, and community-based counselors that was announced by Treasury and the Department of Housing and Urban Development on Oct. 10. "We should focus on results and not on prescribing a single approach," Steel told Congress. "Preserving homeownership is the goal, and we must recognize that many different avenues can get us there."

Over two million subprime mortgages will reset in the next 18 months, he said. Some homeowners will get a long just fine while for others foreclosure is inevitable. However, Steel stated, "A third group of homeowners facing resets fall somewhere in the middle. The challenge is for lenders to identify the homeowners in this middle group, who with a bit of assistance can stay in their homes."

The Hope Now Alliance consists of four counseling organizations, 17 mortgage servicers and lenders (comprising 60% of the mortgage servicing market), three investor groups, and 10 trade associations.

"Since their launch a few weeks ago, the Alliance has been meeting regularly and working hard to develop and implement an aggressive plan to help homeowners," according to Steel. Late last month, for example, the alliance announced a direct mail campaign targeting at-risk borrowers, encouraging them to contact HOPE NOW for help, with limited success. Steel encouraged lawmakers to urge their constituents to make the contact. HOPE NOW is also working to expand the existing counseling network.

On the industry side, servicers are working to establish a set of metrics for servicer loss-mitigation performance or to evaluate counselors' effectiveness.