UPDATE 1-Sen. Clinton calls for subprime mortgage action
(Adds quotes, details; new throughout)
WASHINGTON, March 15 (Reuters) - Presidential hopeful Hillary Clinton on Thursday called for incentives for U.S. lenders to identify troubled mortgages, offer "a foreclosure timeout" and possibly revise repayment terms amid the widening subprime mortgage crisis.
The New York Democrat also said she will soon reintroduce legislation to modernize the Federal Housing Administration
(FHA), which guarantees mortgages so that low-income home buyers can receive lower interest rates.
Clinton said she favors raising FHA loan limits for high-income areas to help more low-income home buyers.
"I also propose a stop to prepayment penalties designed to trap borrowers," Clinton said in a speech to the National Community Reinvestment Coalition.
At least 20 lenders in the subprime mortgage sector, which serves borrowers with poor credit histories at high interest rates, have gone out of business due to rising default rates and falling home prices.
The crisis has triggered broader concerns that the subprime fallout might spread to mainstream lenders and damage the economy.
Clinton blamed the Bush administration for overlooking problems in the subprime mortgage market. Republicans were too focused on providing tax cuts for the rich, she said.
"We've got to take action ... the economy is not supporting home ownership the way we need it to," Clinton said.
The FHA should give consumers more counseling and information on mortgages, she said.
"The Federal Housing Administration must be made to work better," Clinton said.
Clinton called for finding ways to get lenders to identify borrowers who are having trouble making their payments, and to arrange help for them through revised repayment terms.
"Unfortunately, homeowners in distress often simply miss payment after payment and eventually lose their home. A better alternative would be to create incentives for lenders to identify troubled mortgages and to work out solutions before foreclosure," she said.
"For example, give borrowers a period of a foreclosure timeout, during which borrowers will have the opportunity to put their financial houses in order and to work out a payment plan," she added.
(For more information about the subprime crisis, click on [nN14246848]).
((Reporting by Kevin Drawbaugh, editing by Brian Moss; kevin.drawbaugh@reuters.com; +1 202 898 8390)) Keywords: SUBPRIME CONGRESS/
(C) Reuters 2007. All rights reserved. Republication or redistribution ofReuters content, including by caching, framing or similar means, is expresslyprohibited without the prior written consent of Reuters. Reuters and the Reuterssphere logo are registered trademarks and trademarks of the Reuters group ofcompanies around the world.nN15437380
