Reuters reports:
Sen. Charles Schumer, a Democrat of New York, said actions by the Federal Reserve aimed at preserving liquidity in the nation's financial markets were helpful, but failed to address worsening conditions in mortgage markets, especially for subprime loans to less credit-worthy borrowers.Senator Schumer (Democrat-Fannie Mae).
Schumer noted that data released on Tuesday showed that foreclosures in July totaled 179,599, nearly double the rate recorded a year earlier.
"If increased foreclosures are allowed to proceed unchecked, the ultimate harm will extend well beyond the families who will lose their homes," Schumer said in letters he sent to regulators and lenders.
"Increased foreclosures will put additional downward pressure on housing prices, and this...could contribute to spiraling price declines and additional foreclosures," Schumer said. "The effects on households, neighborhoods and the broader economy are likely to be severe."
Schumer urged banks and other lenders to offer cash resources to non-profit agencies that are sanctioned by the Department of Housing and Urban Development to work with homeowners who are experiencing payment problems.
This step, "together with a temporary lifting of the cap on Fannie Mae's and Freddie Mac's portfolio, allowing them greater flexibility for refinancings," would provide a comprehensive solution to stave off the looming foreclosure spike," Schumer said.
