Federal Deposit Insurance Corp. Chairman Sheila Bair said Thursday that mortgage lenders and servicers were not being active enough in helping borrowers restructure their troubled loans.
Loan modifications have been slim, despite regulatory guidelines issued Sept. 4 that urge contact between servicers and borrowers facing foreclosure, Ms. Bair said at a forum on the subprime lending crisis.
"I'm frustrated that … we're getting reports that the servicing restructuring has not reached the level that I hoped it would," she said at the forum, which was held as part of the Congressional Black Caucus' annual legislative conference.
Ms. Bair cited a recent report by Moody's Investors Service Inc. that less than 1% subprime mortgages that have problems "were being restructured in a meaningful way." More loans could be relieved, she said, if servicers willingly switched borrowers to a fixed-rate loan with a rate similar to their starter rate.
"We have this huge problem on our hands, and we can't do this kind of case-by-case, laborious restructuring process with all these millions of loans," Ms. Bair said. "I think some categorical approaches are needed.
"Just convert that mortgage into a fixed-rate mortgage, keep it at the starter rate, convert it into a fixed rate, make it permanent, and get on with it," she said.