Treasury Secretary Henry M. Paulson revealed some of the particulars of the Bush administration's solution to the subprime crisis at the Office of Thrift Supervision National Housing Forum Monday morning. The remarks came just days after Paulson met with the members of the mortgage industry coalition dubbed, HOPE NOW. At that meeting, Paulson charged the group with the task of coming up with a "systematic approach" to the mortgage mess.
Paulson says efforts to remedy the skyrocketing mortgage foreclosure rate include:
- Increasing efforts to reach able homeowners who are struggling with their mortgages;
- Working to increase the availability of affordable mortgage solutions for borrowers; and
- Developing a systematic means of efficiently moving able homeowners into sustainable mortgages.
According to Paulson, the first element of the plan has already been put in motion.
"HOPE NOW servicers are contacting borrowers 120 days in advance of their mortgage reset, to reach them early, before their mortgage problem becomes overwhelming," Paulson said Monday. "For those troubled borrowers that servicers haven't been able to reach, HOPE NOW has launched a nationwide letter campaign. These simple, one-page letters, on HOPE NOW letterhead, provide a toll-free hotline that homeowners can call to explore options with their servicer that may help them keep their home."
Paulson also revealed that the Bush administration is proposing to allow state and local governments to temporarily broaden their tax-exempt bond programs to include mortgage refinancings. "If enacted, this will reduce the cost of innovative mortgage programs and allow these programs to reach more struggling homeowners," says Paulson
Monday's speech came on the same day Paulson received a letter from Sen. Hillary Rodham Clinton (D-N.Y.) calling for an immediate end to the foreclosure crisis. Clinton's proposal calls for a foreclosure moratorium of at least 90 days on subprime, owner-occupied homes; a freeze on the monthly rate of subprime adjustable rate mortgages, with the freeze lasting at least five years or until the mortgages have been converted into affordable, fixed-rate loans; and requiring the mortgage industry to provide status reports on the number of mortgages it has modified.
Although it is anticipated that the Bush administration's subprime relief plan will include an interest rate freeze, Paulson did not address that in his speech. It has been reported that under the White House plan, the rate freeze would be anywhere between five and seven years.
To view a transcript of Paulson's speech, click here.