WASHINGTON The biggest U.S. banks on Wednesday agreed to halt foreclosures on delinquent homeowners for at least a few weeks, until the U.S. government launches a $50 billion aid program for homeowners.
At a congressional hearing on the use of government aid to banks, lawmakers sought commitments from the chiefs of eight big financial institutions to temporarily stop foreclosure efforts.
Pleas from lawmakers came one day after U.S. Treasury Secretary Timothy Geithner unveiled a bank rescue package including a plan to use $50 billion to save troubled homeowners by lowering monthly payments.
The Treasury gave few details on how the plan would work, and said a broader housing aid program could be announced as early as next week.
The U.S. Office of Thrift Supervision, which largely regulates mortgage lenders, urged its regulated institutions on Wednesday to halt foreclosures until a government plan is in place.
"That would be a tremendous gesture to say you will not foreclose on any American's home until we put the plan in place," Rep. David Scott, a Georgia Democrat, said. "Will you do that? Could I get a yes-yes here?"
Bank of America Corp (BAC.N) Chief Executive Kenneth Lewis agreed to a temporary moratorium, but with limits. "If we could put a timeframe on it and not just leave it open-ended, say it is two weeks or three weeks, we could do that," Lewis said.
Scott responded: "Three weeks, that is good news."
The hearing provided a venue for lawmakers who expressed outrage that the eight banks, which received a combined $176 billion from the government, have done little to bolster consumer lending and help homeowners.
Citigroup Inc (C.N) Vikram Pandit said his bank is willing to halt foreclosure procedures for some mortgage holders.
"There are two types of homeowners," Pandit said. "There is the investor, and there is the person living in the home. We will commit to making sure that people stay in their houses as part of the moratorium."
House Financial Services Committee Chairman Barney Frank, who seeks a moratorium, predicted at the end of six hours of testimony that more than 95 percent of U.S. banks will put foreclosures on hold until the Treasury rolls out a housing plan.
"I expect it to be a virtual moratorium on foreclosures until we see the Geithner plan," Frank told reporters.
Banks that service mortgages sold to investors have long complained about lawsuits they face if they modify mortgages held by others. They welcomed legislation being crafted by Frank aimed at providing banks with legal protections.
"Help is on the way in that regard," the Massachusetts Democrat said.
John Stumpf, chief executive of Wells Fargo & Co (WFC.N), said his bank is already modifying mortgages including those held by Wachovia Corp, which Wells Fargo bought on Dec 31.
"We have already put a moratorium in on those homes where we are the investor through Wachovia," Stumpf said. "We have contractual arrangements with our investors. I can't commit to you" on those investor-owned mortgages, he said.
Goldman Sachs Group Inc (GS.N) Chief Executive Lloyd Blankfein said his company is modifying mortgages without the legal protections.
"We are (modifying mortgages) and reducing principal because that is the best way of recovering value," he said. "People tend to stay in houses and support their payments when they have equity."
(Reporting by John Poirier; editing by Carol Bishopric)