U.S. Treasury's Plan Helps Only 3% of At-Risk Homes

WASHINGTON, Jan. 28 /PRNewswire-USNewswire/ -- An updated analysis by the
Center for Responsible Lending shows the Treasury Department's plan involving
streamlined loan modifications of distressed mortgages will prevent only
118,200 foreclosures -- about 3% of the outstanding subprime mortgages with
adjustable interest rates that are causing the current market turmoil. This
analysis shows the Treasury plan, plus existing lender modifications, barely
make a dent in the growing foreclosure crisis and will allow subprime damage
to continue spreading through the entire economy.

(Photo: http://www.newscom.com/cgi-bin/prnh/20080128/DC12569 )

The Center's analysis is based on recent industry data on delinquent mortgages
and on industry analyses of loan modifications made by lenders. The attached
chart summarizes the Treasury plan analysis. In addition, recent MBA data
shows that lenders' voluntary loan modifications are dwarfed by the number of
impending foreclosures. Consider these facts:

-- On all loans, industry data show that for every loan modification made by a
lender, 7 times as many foreclosures are initiated. For the subprime
adjustable-rate mortgages (ARMs) that are at the root of the current crisis,
foreclosures outnumber modifications 13 to 1.

-- Lenders are giving themselves credit for loan "repayment plans," but these
should not count. Repayment plans make homeowners' monthly mortgage payments
higher. And they allow lenders to designate a distressed loan as being current
without actually changing any of the terms that made a mortgage unaffordable
in the first place.

-- It is questionable whether even the true loan modifications will be
sustainable because lenders have no obligation to report outcomes. In fact,
previously Countrywide acknowledged that most of its touted modifications
actually "involved deferring overdue interest or adding the past due amount to
a loan," not reducing interest rates or principal balances on unaffordable
subprime ARMs. (1)

-- The Treasury plan will be a welcome relief for those it helps, but given
the magnitude of today's economic woes, the plan won't help nearly enough to
avoid further widespread economic damage from foreclosures.

The subprime problem is so large it has become everyone's problem.
Foreclosures are not only harming the families who lose homes, they also
spread negative effects through entire communities and the wider economy. In
a recent analysis, the Center found:

-- 40.6 million neighboring homes will experience devaluation because of
subprime foreclosures that take place nearby.

-- The total decline in house values and tax base from nearby foreclosures
will be $202 billion.

To the extent that we can prevent foreclosures and help struggling homeowners
continue paying, we will help the entire economy.

According to Eric Stein, senior vice president of the Center, "The most
effective policy for significantly reducing foreclosures would be permitting
court-supervised modifications of distressed mortgages -- but homeowners are
specifically excluded from such relief under current bankruptcy law.
Legislation to remove this barrier is now moving through both the House and
the Senate. Congress has the power to prevent 600,000 homes from being lost
to foreclosure, at no cost to the national Treasury," said Stein. "We urge
Congress to pass this necessary legislation, both for homeowners and the
nation's economy."

For more information, read our new issue brief, available at
www.responsiblelending.org at
http://www.responsiblelending.org/pdfs/paulson-brief-final.pdf.

About the Center for Responsible Lending

The Center for Responsible Lending (http://www.responsiblelending.org) is a
nonprofit, nonpartisan research and policy organization dedicated to
protecting homeownership and family wealth by working to eliminate abusive
financial practices. CRL is affiliated with Self-Help
(http://www.self-help.org), one of the nation's largest community development
financial institutions

(1) Gretchen Morgenson, "Can These Mortgages be Saved?" New York Times
(September 30, 2007).

SOURCE Center for Responsible Lending

Kathleen Day, +1-202-349-1871, or Sharon Reuss, +1-919-313-8527, both of the
Center for Responsible Lending