US Thrift Regulator, Industry Meet on Home Refinancing
By John Poirier
WASHINGTON (Reuters) - Staff of the U.S. Office of Thrift Supervision (OTS) met with mortgage servicers on Wednesday to discuss a proposal to refinance loans whose home values have dipped, according to a source familiar with the meeting.
The private meeting was held to exchange ideas about the OTS's recent proposal to create "negative equity certificates" that could be publicly traded and did not result in any agreement, the source said.
Attending the session at the OTS were a "handful" of U.S. mortgage servicers, including some not regulated by the agency, the source said.
OTS Director John Reich told U.S. lawmakers on Tuesday that agency staff would meet with industry representatives followed by talks with fellow regulators, including the Treasury Department, on Thursday. The OTS regulates thrifts and mortgage lenders such as Washington Mutual Inc (WM.N) and Countrywide Financial Corp CFC.N, which is being acquired by Bank of America Corp (BAC.N).
The agency recently floated the idea of creating the certificates to address the subprime mortgage crisis.
The OTS plan would prod mortgage servicers to refinance distressed mortgages, with the possibility of recouping some of the losses at a later date. The program would operate alongside other Bush administration-backed programs to modify subprime mortgages for borrowers who are about to lose their homes.
The OTS and other authorities are trying to find ways to provide incentives to servicers and investors holding securities linked to mortgages.
Federal Reserve Chairman Ben Bernanke said in a speech to community bankers on Tuesday that a prevention plan for banks and investors could include the OTS proposal to allow investors to share in any future appreciation of the home.
The OTS proposal "would benefit all stakeholders in troubled mortgages, without letting any party off the hook and without a government 'bailout' or the creation of a new government entity or assistance program," Reich said in a speech on Wednesday to community bankers in Orlando, Florida.
Lawmakers and regulators are voicing a sense of urgency to prevent more borrowers from losing their homes when low introductory interest rates reset at higher rates to create unaffordable monthly payments.
House Financial Services Committee Chairman Barney Frank is planning to soon offer legislation that would allow a federal entity to buy at a discount loans which could be insured by the Federal Housing Administration. The bill, which would also include grants and loans to buy foreclosed or abandoned homes, would apply to owner-occupied homes and exclude investment and vacation homes.
(Reporting by John Poirier)
