Sheila Bair, Chairwoman of the Federal Deposit Corporation (FDIC) is leading the loan modification charge in Washington and is gaining increasing support from Congress in her efforts.
Bair said in prepared remarks delivered before the Senate Banking Committee that the FDIC is working with the Bush administration to create a loan guarantee program that would serve as an incentive for mortgage servicers to modify home loan. This would be part of the financial rescue plan passed earlier this month gives the U.S. Treasury Department the power to use loan guarantees and credit enhancements to facilitate loan modifications and prevent avoidable foreclosures.
“The FDIC is working closely and creatively with Treasury to realize the potential benefits of this authority,” Bair said.
Bair believes that the government could establish standards for loan modifications and provide guarantees for loans meeting those standards. But did not give an estimate for how large such a loan guarantee program could be, but said the bailout legislation provides authority that could hold significant promise for future loan modifications.
“By doing so, unaffordable loans could be converted into loans that are sustainable over the long term,” Bair said.
She concluded, “Minimizing foreclosures is important to the broader effort to stabilize global financial markets and the U.S. economy.”
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