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February 14th, 2009

Mortgage Servicers Delay Foreclosure, Await Plan



Both JPMorgan and Citi have announced their plans to temporarily delay foreclosures, as they await a housing-rescue plan from the Federal government. Despite Treasury Secretary Geithner’s lack of specifics regarding a housing-rescue plan in his address on Tuesday, the servicers are confident that cash will be made available for new programs within a couple of weeks:

Citi said the moratorium is effective Feb. 12 and will remain in place until March 12, or until the Obama Administration finalizes the details of its loan modification program, whichever comes first, the bank said.

In a letter to Rep. Barney Frank, D-Mass., [JPMorgan CEO Jamie] Dimon said JPMorgan has initiated a foreclosure moratorium through March 6.

“We believe three weeks is adequate time for the Treasury to announce – and for us to implement – a new plan,” Dimon said.

According to the latest reports from the Associated Press’ Alan Zibel, President Obama will outline at least part of the housing-rescue plan next week:

The White House said President Barack Obama on Wednesday will outline his much-anticipated plan to spend at least $50 billion to prevent foreclosures in a speech in Arizona, one of the states hardest hit by the foreclosure crisis.

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5 Responses to “Mortgage Servicers Delay Foreclosure, Await Plan”

  1. Kevin Says: February 14th, 2009 at 5:33 pm

    I keep seeing the Mo Mod out in the press, I would assume this is the platform that Treasury will implement

  2. Esko Says: February 16th, 2009 at 12:31 am

    Fannie Mae and Freddie Mac have made earlier announcements of the same and now some of these bigger banks are following in their footsteps, as if trying to prove how responsible and concerned they are. Looks like the real reason the banks are doing this is to soften the coming regulations that will rein them in. But it’s too late now, the damage is done.

  3. Steve Says: February 17th, 2009 at 9:09 am

    Look, a four week moratorium on initiating foreclosures won’t affect either the borrowers or the lenders positively or negatively, at least not in the long term. Foreclosures in some states take over a year, so a one-month delay is not serious.

    The big banks, all of whom had TARP money forced upon them, have to dance to the political tune the administration pipes, at least publicly. Also, mortgage servicers have been criticized for not doing enough to modify loans and keep them out of foreclosure. Waiting for the Obama administration’s plan enables them to pattern future foreclosure prevention efforts after that, and perhaps to insulate them somewhat from criticism.

    Finally, anyone who thinks that simply throwing money at this problem ($50 billion in the stimulus package) will solve it hasn’t been paying attention. Isn’t the root problem that money was being thrown indiscriminately at less than creditworthy borrowers in the first place? “Please, sir, may I have some more?”

  4. Tim Manni Says: February 17th, 2009 at 10:59 am

    Esko: the strategy definitely follows in the footsteps of Fannie and Freddie who began this during the holiday season. The government has control of F&F and also has some marginal influence on the TARP banks as Steve suggested.

    You propose an interesting point: “Looks like the real reason the banks are doing this is to soften the coming regulations that will rein them in.” But as you say, “it may be too late.”

    Thanks for your comment, as well as your links to our blog on your own. We appreciate them.

    Good to hear from you,

  5. Tim Manni Says: February 17th, 2009 at 11:14 am

    Steve: We agree that a short delay (short in terms of the long foreclosure process) won’t negatively affect services too much either way. That being so, it’s easy to also agree that it’s something easy that will make them look better in the eyes of the public.

    You addressed a point that we’ve been very critical of for some time: government interaction and its impact on the marketplace. You hit the nail on the head by saying that the TARP banks “have to dance to the political tune the administration pipes, at least publicly.” Well said.

    Hopefully what ever housing strategies are announced, one will involve a new strategy we reported on last week: the novel idea of actually PREVENTING a foreclosure BEFORE it happens. If you haven’t read it, check it out (http://blog.hsh.com/?p=2385).

    Thanks for your comments, we hope to hear from you again soon,

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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