The Treasury Department "will look for every opportunity possible" to help troubled borrowers avoid foreclosure when it begins buying mortgages and mortgage-backed securities from banks and financial institutions under the Troubled Asset Relief Program.
Assistant Secretary for Financial Stability Neel Kashkari today revealed some of the particulars of how the $700 billion TARP program, passed by Congress and signed into law by President Bush Oct. 3, will be implemented.
Kashkari said a Treasury policy team — one of seven created after the TARP legislation was passed — is in the process of drawing up rules for the reverse auctions the government will use to buy mortgage-backed securities at competitive prices. Another Treasury team is working with bank regulators to identify which types of whole mortgage loans to purchase first and how to value them.
"When we purchase mortgages and mortgage-backed securities, we will look for every opportunity possible to help homeowners" avoid foreclosure, Kashkari said.
Treasury will employ measures like those used by the HOPE NOW coalition of loan servicers, which is engaging in workouts, loan modifications, short sales and refinancings with some borrowers facing foreclosure. Critics have said efforts by HOPE NOW loan servicers haven’t kept pace with the increase in delinquencies and foreclosures (see Inman News story).
Kashkari said Treasury is working with the Department of Housing and Urban Development "to maximize these opportunities to help as many homeowners as possible, while also protecting taxpayers."
In another initiative to stimulate lending, Treasury will establish a program to insure troubled assets, including mortgage-backed securities and whole loans, Kashkari said.
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