Senators see no need for subprime "bailout"

By Patrick Rucker

WASHINGTON (Reuters) - The Democratic and Republican leaders of the U.S. Senate Banking Committee said on Wednesday they see no need for a federal bailout of the subprime mortgage lending industry.

Both spoke after a morning summit on the crisis among subprime mortgage borrowers, who qualified for loans despite shaky credit, and their lenders. The meeting drew lawmakers, regulators, mortgage industry representatives and consumer groups.

"I'm not interested in (a bailout) at this point. I think this problem can be addressed without going down that route," said Sen. Chris Dodd, the Democratic chairman of the committee.

Sen. Richard Shelby, the most senior Republican on the panel, said he would be "unalterably opposed" to a costly federal program to rescue troubled mortgage borrowers and lenders.

"I believe the subprime problem will go on for several years," Shelby said, but added that market forces would be corrective.

Dodd, of Connecticut, said the participants had agreed to several principles to deal with the crisis but that he would convene another meeting on May 2 to hear concrete plans.

According to a leaked document prepared by Dodd's staff, many of the principles concern ways to help borrowers facing foreclosure.

Mortgage servicers should seek to modify the terms of subprime loans before their interest rates are reset higher and set aside dedicated resources and staff to help those borrowers, according to the document.