AGs push for mortgage modifications

Chris Rizo Feb. 2, 2009, 2:38pm

Rob McKenna (R-Wash.)

Richard Cordray (D)

WASHINGTON (Legal Newsline)-A group of state attorneys general is urging federal officials to push national banks and federal thrifts to modify home mortgage loans that are becoming unaffordable for struggling buyers.

In their letter to U.S. Comptroller of the Currency John Dugan and director of the Office of Thrift Supervision John Reich, the attorneys general said loan modifications would help many Americans remain in their homes by avoiding foreclosure.

"Every day, our office hears from families struggling to make their mortgage payments and those who have lost their homes," Washington Attorney General Rob McKenna said. "They are our neighbors and we have as much of an investment in helping them as do officials in the other Washington. The states want to work with federal regulators - not against them - to help reduce foreclosures."

The letter was signed by attorneys general who are members of the State Foreclosure Prevention Working Group. They say the comptroller's office has discouraged national banks from cooperating with the states' effort to collect foreclosure data.

"Loan modifications are a powerful tool in battling this foreclosure crisis, but only when they're used correctly," Ohio Attorney General Richard Cordray said. "We need meaningful payment relief and access to data, so sustainable solutions can be found."

In their letter, the legal officers said they question a recent report by the OCC and OTS indicating that 55 percent of loan modifications made by national banks and federal thrifts were redefaulting within six months.

"We want to convey our deep concern about OCC and OTS efforts to encourage and monitor loan modification efforts," the letter said. "The data suggests that national banks and federal thrifts are relying on traditional loss mitigation techniques common for prime loans in appreciating markets, rather than applying the techniques and lessons learned by subprime servicing specialists on the need to more aggressively adjust payments and principal balances."

In addition to McKenna and Cordray, the letter was signed by the attorneys general of Arizona, California, Colorado, Illinois, Iowa, Massachusetts, Michigan, Nevada, North Carolina, Texas, and the state banking regulators of Maryland, New York and North Carolina.

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