Treasury Secretary tries to get mortgage industry to do blanket loan modifications

Realizing that one by one requests for loan modifications will never work, Treasury Secretary Henry Paulson wants lenders to set up a blanket system for modifying mortgage terms. For example, the lenders could freeze all sub-prime loans that are coming due for an increase in interest rates, at least until they had the chance to review them.

There are about two million loans due to reset to higher rates by the end of 2008. Many of these will immediately go into delinquency and then into foreclosure. But there is not enough time or manpower to review each one and decide whether or not it can work with a modified interest rate. Only a group decision has much chance of working.

Let’s hope Paulson gets his way!

Comments are closed.