WASHINGTON (Reuters) - Too many distressed American borrowers are still reluctant to talk to their mortgage lenders about changing their loan terms because of a lack of financial education, a top U.S. Treasury official said on Wednesday.
Robert Steel, the Treasury’s undersecretary for domestic finance, said in prepared remarks to an advisory committee that he wants such borrowers and lenders to work together to find ways to keep people in their homes.
“Although many mortgage industry leaders have stepped up their efforts to reach delinquent borrowers, many distressed borrowers are still uncomfortable speaking to their lenders. This stems in large part from lack of financial education,” Steel told the President’s Advisory Council on Financial Literacy Subcommittee on the Underserved.
Steel said better financial education among all consumers “could have mitigated at least some of our current housing difficulties,” and said it could help prevent future problems.
“It is the preventative medicine that will help today’s underserved avoid tomorrow’s financial problems,” he said.
Steel also cautioned financial institutions to not cut off credit to worthy borrowers as they tighten lending standards. “As our markets move forward, they will need to find the right balance of improving their own lending practices, while not cutting off responsible, credit-worthy borrowers,” he said.
Steel, in his prepared remarks, did not address legislation under consideration in Congress that calls for a fund to insure up to $300 billion in reduced-value home loans.
Reporting by David Lawder, Editing by Chizu Nomiyama
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