Banks Think it is Not Fair to Waive Principal for Foreclosure Victims
Banks think it is not fair to waive principal for foreclosure victims. High ranking banking top brass are evasive about assisting the harried borrowers by forgiving a part of their debts. They told the legislators last Tuesday, 13th April, that only in few restricted cases they were willing to reduce the principal amount on the mortgage loan. They said it was not fair on those who had remained current on their mortgages.
The CEO of JPMorgan Chase, David Lowman, bluntly speaking to the House Financial Services Committee said that huge reduction on principals “could be harmful to consumers, investors and future mortgage market conditions.”
According the estimate of Chase – bringing down the principal on those borrowers who have gone underwater with their loans being more than the worth of their properties, would add up to $900 billion. Of this $150 billion was scheduled to he borne by the government.
The top CEO of Citigroup, Sanjib Das said that these types of programmes “could raise issues of fairness.” Das and Lowman testified to the committee set up by the Senate, together with the highest executives from Bank of America and Wells Fargo. These four mortgage firms are the biggest in America and have come under harsh criticism for not being proactive with the Obama government’s HAMP plan involving $75 billion. No dent has been made on the gigantic problem with only 170,000 borrowers having completed loan modification. 1.1 million borrowers had started to take part in it since the last one year.
The Democrats are accusing the mortgage industry but the Republicans think that the government should give up this line of action and concentration more on generating jobs. Rep. Spence Bachus (Republican from Alabama) said, “The market needs to find its own footing free of government intervention and manipulation so we can revive our economy and get on with a full housing market recovery.”
Last March the Federal Government kicked off a plan to bring down the principal for those homeowners who have gone underwater and are unemployed. The warning was given that not all the troubled owners of residential houses would benefit. The government calculated that if implemented it would help 3 million of the 4 million it had originally targeted.
The four jumbo banks are the prime holders of second liens – the problem that is coming in the way of modification. In second loans or “piggyback” mortgages the borrowers practically did not have to make any down payments.
