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Citigroup Reaches Deal With Lawmakers on Home Loans
Sen. Charles E. Schumer, left, with Senate Banking Committee Chairman Christopher J. Dodd.
(By Chip Somodevilla -- Getty Images)
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Durbin called those requests "eminently reasonable." He said House leaders have also endorsed the changes, though some have done so with reluctance.
"I think it should apply to all mortgages for all time," said Rep. Brad Miller (D-N.C.), who joined the senators at the news conference. But in the face of the mounting foreclosure crisis, Miller said, "we have to do what's possible."
The Mortgage Bankers Association said in a statement that it remains opposed. "We were surprised by the suddenness of the announcement and are still evaluating the proposed deal, but we believe there remain a number of crucial issues that need to be addressed," the statement said.
The legislation should be limited to subprime loans, the group said, and expire after a predetermined period. "This legislation would have a significant effect on the mortgage markets, and we believe it ought to be subject to the normal legislative process, including hearings."
Troubled homeowners not in bankruptcy could benefit more than those in the process, supporters of the measure said. Lenders are more likely to attempt aggressive modifications when they can still control the terms, rather than allow a judge to set the limits. "Right now, the biggest impediment to meaningful foreclosure prevention is the lack of willingness of investors to make significant modifications," said John Taylor, president of the National Community Reinvestment Coalition, a consumer advocacy group. Changing the way bankruptcy judges handle primary residences "would force people to the table to hopefully come up with meaningful modifications."
The lending industry has argued that allowing bankruptcy judges to change the terms of these mortgages would raise costs for all home buyers. But Schumer said yesterday that by limiting the agreement to current mortgages, it would not affect future interest rates. And the financial and housing industries began to acquiesce in recent weeks, starting with the National Association of Home Builders. Its president, Jerry Howard, said last week that the economic crisis is so severe that "every possible solution must be on the table."
The group is open to cramdowns but is still reviewing the details of the agreement negotiated by Citigroup, an NAHB spokesman said.
Schumer said Citigroup's support for the measure has since spurred "most of the major banks" to call his office, "wanting to hop on board."
