New York, NY Acting
Comptroller of the Currency Julie L. Williams said today there may be no more
immediate challenge facing community development today than the problem of
foreclosures, and they represent a huge challenge for government, financial
institutions, and non-profits dedicated to the goal of expanding home ownership
and saving at-risk communities.
Whatever route it
takes, foreclosures can have a devastating impact on borrowers and their
communities, Ms. Williams said in a speech before the Regional Interagency
Committee. That can lead whole
neighborhoods into a costly and prolonged downward spiral. And for homeowners who lose their
properties, the foreclosure process leaves a devastating scar.
Ms. Williams noted that
while pricing flexibility has opened the door to homeowners for many Americans,
it has also produced a new class of borrowers whose repayment capacity is
fragile. In addition, it has produced a
new class of lenders willing to take on riskier borrowers at a very high price,
and make loans based on the value in a borrowers home that the lender can
capture in a foreclosure, rather than on the borrowers ability to repay.
Ms. Williams reported
that the challenge of foreclosures is increasingly being met with aggressive
partnership programsprograms designed to help financially capable borrowers
who run into difficulties continue to service loans and stay in their homes, whenever
possible. She cited NeighborWorks®
programs in Chicago and New York as examples, and noted that programs geared to
urban hubs are being modified by community-based nonprofit housing counseling
organizations for use throughout the country.
These comprehensive
programs have a number of common features important to success including
bringing together not only providers of homebuyer education, but also credit
counseling agencies, local government, lenders and secondary market agencies,
Ms. Williams said.
Each of these parties
has a particular interest in the health of the borrower, the loan, and the
neighborhood, Ms. Williams noted. By
uniting their efforts, we have learned that the odds of success for all greatly
improve.
Ms. Williams said that
strategic partnerships between lenders, nonprofits, and municipal agencies are
making a big difference in mitigating the effects of foreclosures and they are
working together to stabilize at-risk neighborhoods by targeting vacated
properties in need of rehabilitation.
Lenders that hold such
properties may turn them over to the nonprofit, typically at deep discount; the
nonprofit oversees the rehab work, typically using government subsidies, and
then markets the property to a low-or moderate-income family, Ms. Williams
said. The housing unit is thus
returned to the tax rolls; the lender removes a troubled property from its
balance sheet; and a family and a neighborhood have benefited.
Ms. Williams
underscored that there is still much to do to reduce the risk that borrowers
will face foreclosure in the life of their mortgage, to ensure that low-and
moderate-income homebuyers have access to the full range of financial options
for which they qualify, and reduce the overall dependence on very high cost subprime
loans.
If theres anything
that experience has taught us, its that there is much we can accomplish when
dedicated people willing to roll up their sleeves and tackle a challenge, Ms.
Williams concluded.
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The Office of the
Comptroller of the Currency was created by Congress to charter national banks,
to oversee a nationwide system of banking institutions, and to assure that
national banks are safe and sound, competitive and profitable, and capable of
serving in the best possible manner the banking needs of their customers.