UPDATE 2-Big US mortgage firms won't back subprime principles
(Updates number of companies, paragraph 3; EMC Mortgage, a unit of Bear Stearns, paragraph 7)
By Patrick Rucker
WASHINGTON, May 2 (Reuters) - The two largest mortgage lenders in the United States have declined to endorse a set of principles that would help troubled subprime borrowers avoid foreclosure, a lawmaker who proposed the principles said on Wednesday.
Representatives from Countrywide Financial Corp. CFC.N and Wells Fargo & Co. (WFC.N) both attended a mid-April 'subprime summit' organized by the chairman of the Senate Banking Committee, but those companies did not endorse the seven principles, which were formalized after that meeting.
On Wednesday, U.S. Sen. Chris Dodd, the chairman, congratulated the 12 companies, trade and consumer groups who endorsed his principles. Dodd's statement did not mention Countrywide, Wells Fargo or EMC Mortgage Corp. which also had a representative at Dodd's meeting. "I commend the organizations and companies that have joined me in formulating and agreeing to these principles, and I urge others to participate, or face explaining to their customers and the public their refusal to adhere to common-sense guidelines that will help preserve homeownership and strengthen our communities and our nation's economy'" Dodd said in a statement.
A spokesman for Dodd's office declined to comment specifically on Countrywide, Wells Fargo or EMC Mortgage's participation in the debate over principles but referred to Dodd's prepared statement.
Representatives for Countrywide and EMC Mortgage did not immediately respond to a request for comment. But Bear Stearns BSC.N, which operates EMC, has endorsed the principles.
A spokesman for Wells Fargo said the company "believes that many of the points raised at the summit are especially important, and also describe long-standing practices" at Wells Fargo. However, the spokesman would not explain why Wells Fargo did not fully endorse the principles. The seven principles are meant to aid borrowers and save them from foreclosure, according to a statement from Dodd's office.
Among the principles, mortgage servicers should seek to modify the terms of subprime loans before the interest rates are reset higher, and they should set aside dedicated resources and staff to help those borrowers.
Fannie Mae (FNM.N) and Freddie Mac (FRE.N) should work with lenders to make credit available to borrowers who have trouble refinancing subprime loans, the document also states.
Another principle calls for servicers to make early contact with subprime borrowers with adjustable-rate mortgages to determine if they qualify for a more stable loan.
The goal of the summit was to "maximize the number of homeowners who are able to stay in their homes who would otherwise be threatened with default and foreclosure as subprime hybrid ARMs reset, resulting in significant payment shocks," according to a statement from Dodd's office released on Wednesday.
An explosion of subprime mortgages available to borrowers with damaged credit helped fuel a five-year run up in home values that ended in 2005. Now that many of those loans are becoming delinquent, regulators, lenders and lawmakers are trying to stabilize the home finance system.
((Reporting by Patrick Rucker, editing by Neil Stempleman, Leslie Gevirtz; Reuters Messaging: patrick.rucker.reuters.com@reuters.net; e-mail: patrick.rucker@reuters.com; +1-202-310-5474)) Keywords: USA SUBPRIME/REGULATE
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