Bush administration seeks private sector fix for housing

U.S. Treasury Undersecretary Robert Steel answers questions during the Reuters Housing Summit in Washington February 21, 2008.

WASHINGTON (Reuters) - The Bush administration is cool to the idea of a government bailout for U.S. homeowners facing foreclosure, at least until it is clear whether the private-sector initiatives it champions can work.

Treasury Undersecretary for Domestic Finance Robert Steel told the Reuters Housing Summit on Thursday that the next 30 to 60 days will provide a much better gauge of efforts by the Hope Now alliance of mortgage lenders and servicers to keep troubled borrowers from losing their homes.

Steel said the Treasury wants to hear new ideas to help the staggering U.S. housing market but made clear he is not ready to discuss any additional options until a fuller evaluation of current efforts can be made.

"Right now we're committed to the programs we've presented and our focus is on making those as successful as we can," Steel said. "We've said publicly, and I'll say it again today, we're always interested in new ideas. But I think that the strategies that we're working on are the ones that we think are correct for now, and we'll continue to evaluate other things and see where we go."

He said a suggestion from Democratic Sen. Christopher Dodd of Connecticut that the government consider creating a special fund to buy up distressed mortgages did not seem appropriate to the current economic situation. He noted that the last time such a step was taken was during the Great Depression.

"That was in 1934 that this idea was introduced. The foreclosure rate was at 50 percent and the unemployment rate was at 25 percent. That does not seem to be the right tool for this task, to my mind," Steel said.

The Hope Now alliance was created under Treasury guidance last October, as turmoil in the U.S. housing and credit markets deepened, to coordinate mortgage industry efforts to renegotiate terms on subprime loans facing resets to higher, unaffordable levels.

It has since been modified twice to include a wider range of loans and assistance to help stem a rising tide of foreclosures. A program to automatically freeze some subprime rates at low, initial "teaser" levels started in January, while servicers agreed to stay foreclosures on all seriously delinquent mortgages for 30 days.

BENCHMARK DATA

The Treasury is working with Hope Now to provide regular benchmark statistics for Hope Now's performance, starting around the end of this month for January.

The group has said it helped modify some 870,000 loans in the second half of last year.

"Within the next 30 to 60 days, I think we'll get a much richer set of data than we have historically," Steel said, adding that the new data should show a "nice lift."

Asked whether the Treasury wanted the foreclosure rate for Hope Now cases to show a drop from its current level of about one-third, he said that would depend on factors including local economic conditions and the ratio of investment properties.

"We've got to get into the granularity of the numbers," he said. "If someone who owns three condominiums in Las Vegas for 2 percent down (down payment) is not getting helped, you know ... (that's) OK."

The Hope Now data, which will be released on a one-month delay, will allow the Treasury to "see how we're doing and we'll try to apply pressure along this process where we can to have the best results."

The data will help determine which efforts and refinancing products are having the biggest impact in preventing foreclosures, he added.

Steel was reluctant to discuss possible next steps. "That's kind of a duck, because if I start talking about what we might do if this happened, if that happened then ... we want to stay on our message in what we're trying to do," Steel said. "Now is a critical time to make sure we're doing as much as we can for Hope Now."

He acknowledged that it has been a challenge putting together an unwieldy group of mortgage companies and investors who were not used to working together to rescue homeowners.

"This alliance has some discordancy. These people were all competitors until we asked them to change jerseys and take off whatever their current institutional or functional jersey is and put on a Hope Now jersey," he said. "So the fact that there's occasionally friction or discordancy ... that happens and we're working through that pretty constructively."

(For summit blog: summitnotebook.reuters.com/)

(Additional reporting by Glenn Somerville, editing by Gerald E. McCormick)