“We applaud the Federal Deposit Insurance Corporation (FDIC) for introducing its Loss Sharing Proposal to Promote Affordable Loan Modifications. This is the most significant proposal to date to modify loans on a wholesale basis – a critical step toward a solution that is in proportion to the enormous scope of the problem. FDIC estimates its proposal could help prevent as many as 1.5 million foreclosures in 2009 – more than five times the estimated impact of the plan announced last week by the Federal Housing Finance Agency (FHFA). Without bold action, the foreclosure crisis will worsen, dampening prospects for an economic recovery.
FHFA and its partners should also be commended for recognizing the need for mass loan modifications. However, the chief problem with their plan is its limited scope.
According to Mark Zandi, chief economist for Moody's Economy.com, 1.6 million Americans will lose their homes in 2008 either in a foreclosure or distressed sale. Another 1.9 million are projected to lose their homes in 2009. RealtyTrac estimates that 765 thousand foreclosure filings were made on U.S. properties in the third quarter of 2008 alone – up three percent from the second quarter and 71 percent from the same period last year. In addition, the Center for Responsible Lending calculates that over 40 million homes will lose value due to proximity to foreclosures.
Unfortunately, foreclosure mitigation efforts to date have not been as successful as anticipated. Credit Suisse estimates that 45 percent of loan modifications done in fall 2007 have already gone back into default. By making the payments affordable to each family based on their income, on a long-term basis, the FDIC plan has a much better chance of success.
We encourage leaders in the Administration, House and Senate to work with the FDIC to implement their proposal, or a plan of similarly wide impact, as soon as possible. Assistance for renters who are impacted by foreclosures should also be integrated into any plan. A wholesale approach to loan modifications that provides incentives for servicers and investors to agree to the modifications, while ensuring that homeowners can afford their modified mortgages, will help shift the tide for families, communities and our nation as a whole.”
The following members of the National Foreclosure Prevention and Neighborhood Stabilization Task Force have signed on to the above statement:
Center for American Progress Action Fund
Center for Responsible Lending
Citizens' Housing and Planning Association
Consumer Federation of America
Enterprise Community Partners
Housing Partnership Network
Mercy Housing Inc.
National Alliance of Community Economic Development Associations
National Community Land Trust Network
National Council of La Raza
National Housing Conference
National Low Income Housing Coalition
National NeighborWorks Association
National Policy and Advocacy Council on Homelessness
NCB Capital Impact
Wisconsin Partnership for Housing Development, Inc.