Industry News

Four servicers agree to streamline California workouts

Governor says plan based on FDIC chief's proposal

Four companies that service 25 percent of outstanding subprime loans in California have agreed to streamline the loan modification process to allow some borrowers with adjustable-rate mortgages to avoid interest rate resets. California Gov. Arnold Schwarzenegger said a voluntary agreement with Countrywide Financial Corp., GMAC Mortgage, Litton Loan Servicing and HomeEq Servicing is modeled after a proposal put forward by Federal Deposit Insurance Corporation chief Sheila Bair. Bair, citing a report by Moody's Investor Services that servicers were engaging in workouts on less than 1 percent of troubled subprime loans, last month urged them to embark on a program of wholesale conversions of adjustable-rate mortgages into fixed-rate loans when borrowers are in danger of default. In an interview published in today's Wall Street Journal, U.S. Treasury Secretary Henry Paulson said he expects a "significantly bigger" number of mortgage defaults in 2008, and said he is encouraging servicers to...

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