The Wall Street Journal-20080119-Subprime Borrowers Get Easier Terms- Mortgage Firms Gave 370-000 A Break in 2nd Half
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Subprime Borrowers Get Easier Terms; Mortgage Firms Gave 370,000 A Break in 2nd Half
WASHINGTON -- With house prices sliding and defaults on the rise, mortgage companies negotiated easier terms with 370,000 troubled subprime borrowers during the second half of last year, according to industry data released Friday.
The assistance included new repayment plans for 250,000 borrowers in the third quarter. Another 28,000 borrowers in the quarter, and triple that number in the final three months of the year, had their terms modified, such as rate freezes.
The numbers are expected to jump further since the mortgage industry, backed by President Bush, said last month that it would expedite refinancing or five-year rate freezes for as many as 1.2 million troubled subprime borrowers, a program that is now becoming operational and wasn't reflected in Friday's lending data.
"The point is we're helping homeowners by changing the terms of their mortgages," said Steve Bartlett, president of the Financial Services Roundtable, a trade association of the 100 largest banks, insurance companies and other financial-services firms. The group is part of the Hope Now Alliance, which released the data and is coordinating the industry response to the mortgage meltdown.
Loan servicers, lenders and investors who own mortgage-backed securities have come under pressure from consumer groups, Congress and the administration to find ways to help subprime borrowers stay in their homes. An estimated 1.8 million subprime borrowers will see their interest rates jump over the next two years, unless they manage to get new mortgages or win looser terms on their existing loans.
The impending rate increases have raised fears of a new wave of foreclosures that could ripple into financial markets and the already- weakened economy.
Treasury Secretary Henry Paulson called the industry's progress in preventing defaults "heartening," but he said the administration "will look for additional measures to reach more borrowers to prevent as many avoidable foreclosures as possible." In recent weeks, Mr. Paulson has suggested that the industry might expand its help to include borrowers with nonsubprime adjustable loans.
"Obviously, much more is needed," said Rep. Barney Frank (D., Mass.), chairman of the House Committee on Financial Services. "But I welcome the progress that has been made."
Until the market dried up in recent months, lenders usually provided pricier subprime mortgages to borrowers with poor credit ratings.
