MBA's vice chairman testifies on loan modificationsMortgagePress.comMBA, Robert Story, Seattle Financial Group, HR 5579, The Emergency Loan Modification Act of 2007
Robert E. Story Jr., CMB, vice chairman of the Mortgage Bankers
Association and president of Seattle Financial Group of Seattle,
Wash., testified on April 15 before the House Financial Services
Subcommitee on Capital Markets, Insurance and Government Sponsored
Enterprises. In his testimony, Mr. Story discussed HR 5579, The
Emergency Loan Modification Act of 2007 and the industry's efforts
to help at risk borrowers, including successes achieved and ongoing
challenges preventing lenders and servicers from helping more
borrowers.
The following is an excerpt of Mr. Story's oral testimony, as
prepared for delivery:
"HR 5579 would protect servicers from litigation risk if they
engage in certain loss mitigation efforts. MBA identified
litigation risk as a barrier to work outs some months ago, and we
have been working as an industry to address this issue. We are
focused on improving clarity between investors and servicers.
Significant strides have already been made and continue to be
made.
"The industry formed HOPE NOW to help homeowners avoid
foreclosure. We are funding counseling and are promoting the HOPE
NOW hotline for borrowers: (888) 995 HOPE. We have improved and
standardized our servicing practices.
"The investor community has stepped up in many ways. For
example, investors have created guidelines to define the term
"foreseeable default" that helps us help more borrowers. This was a
major advance.
"Many servicers have also instituted foreclosure "pauses" to
help give borrowers and lenders more time to work out a solution
that keeps borrowers in their homes.
"These industry practices allow servicers to do more to help
borrowers. Nearly 1.2 million repayment plans and modifications
were executed from July 2007 through February 2008, according to
HOPE NOW. This is an unprecedented response by the mortgage
industry.
"Given what the industry has done already, we recognize that
more needs to be done. HR 5579 is a thoughtful proposal to help us
do more. Our concern, however, is that the potential harm may
outweigh the potential benefits.
"Borrowers and mortgage companies desperately need greater
stability and liquidity in the market. The best way to improve
liquidity is through investor confidence. Any effort that increases
investor risk, including protecting servicers from liability,
hampers this goal.
"We are concerned this bill may create investor uncertainty,
similar to recent bankruptcy proposals, despite the care the
drafters took in trying to balance the interests of investors and
servicers.
"MBA believes policy efforts should be focused on giving lenders
and borrowers more options to work together, such as new loan
products to allow borrowers behind on their payments or "upside
down" on their mortgages to refinance. The Committee is currently
working on such a proposal, and we look forward to participating
constructively throughout that process.
"MBA is also eager to partner with Congress to finish work on
FHA modernization, GSE oversight reform, housing tax incentives and
expanded mortgage revenue bond authority. The Mortgage Bankers
Association appreciates your efforts to help borrowers stay in
their homes. Servicers will continue to use their contractual
authority to perform loss mitigation to the extent permissible and
prudent.
"It remains unclear to us, however, whether the benefits of HR
5579 outweigh the potential harm the bill may cause the mortgage
market overall."
Story's full written testimony can be found at www.mortgagebankers.org.
