In response to the federal government's unprecedented investment of $250 billion in major U.S. financial institutions, PICO National Network today delivered the below letter urging Treasury Secretary Henry Paulson to require that institutions receiving government assistance adopt proven FDIC loan modification protocols to keep families in their homes.
PICO is launching a nationwide campaign to press lenders and regulators to more aggressively modify loans for families facing foreclosure. On October 27, PICO affiliate Contra Costa Interfaith Supporting Communty Organization (CCISCO) in Antioch, California - a community hard-hit by the foreclosure crisis - will be holding a summit with lenders and faith-based community organizations from across the United States to seek systematic solutions that go beyond current case-by-case loan modification approaches. The summit will take place at 7pm Pacific time and will be video-cast nationally.
October 14, 2008
The Honorable Henry M. Paulson, Jr.
Secretary
United States Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
Re: Foreclosure prevention
Dear Secretary Paulson:
As a national network of faith-based community organizations working to help American families weather the economic crisis, PICO National Network believes that the federal government must address the root causes of the credit crisis by doing everything in its power to stem the tide of foreclosures.
We invite you and interim head of the Office of Financial Stability, Neel Kashkari, to attend a summit on October 27 with lenders and faith-based community organizations from across the United States to seek systematic solutions that go beyond current case-by-case loan modification approaches. The summit will be held from 7-8:30pm in at the Holy Rosary Parish Center, 21 East 15th Street, Antioch, California, in one of the communities in the United States that has been hardest hit by the foreclosure crisis. The summit will be hosted by the PICO affiliate Contra Costa Interfaith Supporting Community Organization and will be video-cast nationally.
To stabilize the housing market, protect taxpayers and keep families in their homes, PICO believes that the Treasury Department must act quickly to use the powers granted by H.R. 1424 to mitigate foreclosures, including its power to purchase whole loans and to use loan guarantees and credit enhancements to facilitate loan modifications to prevent avoidable foreclosures.
The FDIC's Loan Modification Program for Distressed IndyMac Mortgage Loans, and the recent agreement between State Attorney Generals and Bank of America demonstrate that it is possible to systematically modify troubled loans to get families back on track in their mortgage payments and stabilize housing values.
Treasury should follow suit by adopting successful broad-based loan modification protocols developed by the FDIC to reduce mortgage-related payments to levels that families facing foreclosure can afford. Where necessary to make mortgage payments affordable and reflect property value declines, loan modifications should include principal reductions.
Specifically:
- Treasury should adopt the FDIC protocols for loans that it purchases, and should press servicers to adopt these protocols when the federal government owns a partial stake in a mortgage, and Treasury should require an FDIC-like modification be adopted by any bank that it invests in.
- Broad-based loan modification should apply to sub-prime, option ARM and other Alt-A mortgage loans.
- Monthly payments should be reduced to 34 percent of monthly income
- When interest rate reductions are not sufficient to reduce monthly payments to 34 percent of monthly income, loan modifications should include principal reductions.
Broad-based loan modification is a win-win for borrowers and investors, including tax payers who are on the hook for bad loans. As FDIC Chairwoman Sheila Bair has said, restoring troubled loans into performing ones yields 87 cents on the dollar for a mortgage later sold, compared to 32 cents for nonperforming mortgage.
We look forward to participation from the Treasury Department in the October 27 Summit and to swift action to get moving on maximizing the number of families that are able to remain in their homes.
Sincerely,
Fr. Roberto Corral, O.P.M.
Pastor, Holy Rosary Catholic Church, Antioch, CA
Contra Costa Interfaith Supporting Community Organization
Fr. John Baumann, Executive Director
PICO National Network
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Since 1973, PICO has been helping families find quality, affordable housing through the development of mixed-income housing, comprehensive neighborhood reinvestment strategies, inclusionary-zoning ordinances, renter protections, housing trust funds and first time homeownership programs. PICO is a non-partisan organization that does not endorse or support candidates for office. www.piconetwork.org
More information
U.S. map showing foreclosures during 2nd Quarter of 2008 (RealtyTrac)
Reset schedule for Option ARMs (Adjustable Rate Mortgages) April 2008 to August 2012
