Regulators Urge Refinancing of Securitized Mortgages

U.S. bank regulators urged mortgage lenders to ease terms on the subprime loans they packaged into bonds, seeking to stem foreclosures that may aggravate what's already the worst housing slump in 16 years.
The Federal Reserve and other bank regulators asked lenders to review their authority under pooling and servicing agreements to identify borrowers at risk of default and offer to refinance to help them keep their homes, the agencies said in a joint statement released today in Washington.
``We encourage servicers of securitized mortgages to reach out to financially stressed homeowners,'' Fed Governor Randall Kroszner said in a statement.
The regulators' recommendation is part of a broader push by the federal government to stem the growing rate of foreclosures among borrowers with weak credit or high debt and to quell the recent turmoil in the credit markets.
Last week, President George W. Bush unveiled his plan to help homeowners avoid foreclosure, including a new initiative that would allow the Federal Housing Administration to help borrowers facing rising mortgage payments stay in their homes.
The number of U.S. homes under foreclosure almost doubled in July from a year earlier as property owners with adjustable-rate mortgages faced larger monthly payments, according to RealtyTrac Inc., the Irvine, California-based seller of foreclosure data.
The regulators urged lenders to use their authority under the securitization documents to identify borrowers at risk of delinquency or default, including those facing interest-rate increases on their loans, and contact them to assess their ability to repay.
They should consider helping borrowers avoid foreclosure by deferring payments, converting loans to a fixed-rate mortgages and other ways that help homeowners manage payments, the regulators said.