The initial reaction by nonprofit housing counselors across the nation to the announcement that Treasury Secretary Tim Geithner and HUD Secretary Shaun Donovan were going to call the chief executives of the 25 largest mortgage servicers on the carpet on July 28 was very positive.
We have since learned that neither secretary will be at the meeting and no CEOs will be attending. Unless major decision makers are at the table, our foreclosure environment will not change substantively, the Making Home Affordable Program will not realize its purpose, foreclosures will continue to rise and be a drag on the economy and millions of homeowners will be left stuck without help or hope. To further ensure that Making Home Affordable is successful, nonprofit counseling organizations that fully represent the diversity of our nation must be heard, respected and engaged in the solution.
We believe that despite its apparent shortcomings, the Treasury/HUD proposal to force the 25 largest servicers accounting for an estimated 98% of mortgages facing foreclosure to a meeting is needed and can succeed. These are our suggestions for ensuring the success of the Making Home Affordable Program.
- Schedule a meeting in September with the 25 largest mortgage servicers when both Geithner and Donovan are available.
- Do not exclude Fed Chairman Ben Bernanke and FDIC Chairman Sheila Bair from the meeting. They have a vital role to play. For example, over the last two years, the FDIC has been the leader in calling for fundamental reform and has successfully enacted systemic changes within IndyMac that could be a model for all servicers.
- Modify the letter to the 25 servicers to encourage the CEOs of the 25 largest servicers to attend with the most senior official in charge of loan modifications.
- Use the additional time to call for a meeting with the HUD-approved housing counseling agencies, including the 12 minority-founded agencies with missions to rebuild the financial foundations of their people and to correct the unique challenges faced by the populations they serve. A wide range of minority representation must occur since past Treasury/HUD meetings have been sparsely attended by minorities, despite the fact that the harshest impact of foreclosures has been on families of color.
For Treasury and HUD to get the results that they want, and for homeowner families to get the solid financial foundation they need, HUD intermediaries and the counseling organizations they represent must be provided the same amount of funds that Treasury has allocated to the lender/servicers to resolve the foreclosure crisis. Counseling organizations are on the front line in the battle to prevent foreclosures. They have the trust of homeowners and are an essential way to improve the financial dynamics for people of color across the country.
At least $10 billion has been allocated directly and many billions more indirectly to assist these 25 lender/servicers to modify mortgages and make mortgages affordable for millions of at-risk homeowners. Change the focus on lender/servicers and instead support the work that the HUD-approved counseling organizations do. We suggest that $300 be paid for each client they attempt to service and a minimum of $1,000 more if the loan modification goes through. This is far less than the cost that the lender/servicers contend it is costing them to perform loan modifications.
Counseling organizations can help lenders increase modifications, stabilize families and have a positive impact on the economy at the same time.
With the help of Rep. Barney Frank, we have called for preliminary meetings with five of the largest servicers to discuss these issues on Aug. 7.