Sheila Bair, chairwoman of the Federal Deposit Insurance Corporation, testified before the Senate Committee on Banking, Housing and Urban Affairs urging policymakers that "we need to act and we need to act quickly and we need to act dramatically."
The full committee held a hearing yesterday morning to investigate "Turmoil in the U.S. Credit Markets: Examining Recent Regulatory Responses." Bair testified alongside Neel Kashkari, interim assistant secretary for financial stability and assistant secretary for international affairs, U.S. Department of the Treasury; Brian Montgomery, federal housing commissioner and assistant secretary at the Department of Housing and Urban Development (HUD); James Lockhart, chairman of the Federal Housing Finance Agency; and Elizabeth Duke, governor of the Federal Reserve System.
Witness panelists, including Bair, discussed the creation of a plan for standardized loan modification practices to be used by mortgage servicing firms that would provide eligible loans with a partial federal guarantee. This plan would hopefully protect homeowners from foreclosure, which has become an urgent problem as a new study reveals the rate of foreclosure filings have increased 71 percent in the past year.
The creation of programs that encourage loan modifications have become highly debated in light of current economic turmoil. The Department on Housing and Urban Development initiated a program called Hope for Homeowners on October 1 that supports loan modifications with government guarantees, but the program will take time to implement before providing tangible relief to eligible communities.
Read more about yesterday's hearing and the loan modification debate in this article published by the New York Times.