Houston & Texas foreclosure homes News

Lenders urged to help avert loss of homes
Attorney general seeks conversion of mortgages, waived penalties

By JANET ELLIOTT found  Nov. 6, 2007 at Houston Chronicle Austin Bureau

AUSTIN — Texas Attorney General Greg Abbott is calling on lenders to convert adjustable-rate loans into fixed mortgages so more Texans can keep their homes.

Ballooning mortgage payments are fueling a jump in foreclosures this year and more defaults are expected next year as rates rise again.

Abbott met Monday with officials from Citigroup, HSBC, Wells Fargo and Chase and urged them to work to preserve homeownership, improve consumer communication and resolve complaints.

In addition to converting loans, he asked the bankers to waive penalties and late fees, and engage homeowners in a nonconfrontational setting and explore solutions before sending a case to collections.

"Mortgage lenders, loan servicers and public officials must work cooperatively on behalf of Texas homeowners who are affected by the looming housing crisis," he said in a press release.

'Some guy in Zurich'

Abbott asked the meeting's participants to report within 30 days on the percentage of adjustable-rate mortgages they convert to fixed-rate loans and the number of service fee waivers. Last month he held a similar meeting with Countrywide Mortgage, Houston-based Litton Loan Servicing and Dallas-based EMC Mortgage.

 

Next year is expected to bring a wave of increased payments for homeowners with $600 billion worth of subprime adjustable-rate mortgages nationwide.

Jay Westbrook, a University of Texas business law professor, said Abbott's effort is worthwhile but that the common practice of selling mortgages will make it difficult to implement his suggestions.

"It used to be your friendly neighborhood bank or savings and loan gave you your mortgage and held it for 20 or 30 years. If you got in trouble you could go down and talk to them and work it out," Westbrook said. "Now it's probably owned by some guy in Zurich."

Complications

Greg Hassell, a spokesman for Chase, said renegotiating loans does become more complicated when those notes are sold. In many cases, Chase still services the loans but cannot change the terms.

In those situations Chase tries to facilitate discussions between homeowners and the mortgage owners.

"Often these things have to be resolved on a case-by-case basis," he said. "It makes it more difficult to come up with a one-size-fits-all solution."

Chase began a program this year to notify homeowners two to five months before the rate on their adjustable loans goes up.

"It gives the homeowner advanced personalized information about their monthly mortgage payment and how it will change," Hassell said.

In addition to using his bully pulpit to help stave off fore- closures, Abbott has gone to court to shut down companies that advertise they can help homeowners renegotiate their loans for a fee. He has accused two companies of deceptive practices.

janet.elliott@chron.com