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Modifying the Mortgage Giants
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The program had critics inside and outside government. The Federal Deposit Insurance Corp.'s chairman, Sheila C. Bair, who has tussled with the Bush administration over her desire to use part of the government's bailout fund to modify mortgages, said at the time that Fannie and Freddie's plan "falls short of what is needed to achieve wide-scale modifications of distressed mortgages."
Bruce Marks, executive director of the Neighborhood Assistance Corporation of America, called the plan just "symbolism."
"Very few people will qualify," he said, "and the people who do qualify will pay such a high percentage of their income for their mortgage payments that they will have very little left for the basic necessities."
Marks held a protest with 100 people in October outside Fannie's Wisconsin Avenue headquarters, and Allison invited him inside, talking with him for an hour in the first of two meetings. Although critical, Marks credited Allison with being open-minded. "He was not afraid to ask the questions, to push the issue and to voice his opinion," Marks said.
In late November, Lockhart, Allison and Moffett made their first pilgrimage to the office of Rep. Barney Frank (D-Mass.), chairman of the influential House Financial Services Committee.
Frank, who had complained that the administration was not doing enough to help struggling borrowers, had invited the three men to learn how they would address foreclosures. Sitting side by side, Lockhart, Allison and Moffett explained what they were doing but added that other firms owned most of the country's distressed mortgages and needed to take big steps, too.
Fannie and Freddie are now considering additional steps, including reducing the amount of income applied toward a mortgage and modifying loans before they become delinquent, according to people familiar with the companies' plans. "We're not going to be bound by past policies, traditions and habits," Allison said. "And we're going to take a very open and unfettered look at how we're operating."
