U.S. Treasury Secretary blasts Banks at Senate Hearing

U.S. Treasury Secretary blasts Banks at Senate Hearing

Treasury Secretary Geithner blasts balking banks

They're just not trying hard enough, he tells Senate Appropriations Panel

While banks plead innocence, more Americans feel foreclosure pain

Treasury Secretary Timothy Geithner advised a Senate Panel yesterday that banks were still not doing nearly enough to help American households out of foreclosure. He added that some distressed borrowers who were entitled to federal aid were continuing to lose their homes.

This is bad news for millions of distressed American families who didn't cause the problem, and who are already facing the prospect of being put out on the street.

While Geithner conceded that some lenders were doing better than others, he advised that all banks participating in the foreclosure program would be subjected to Treasury Department's targeted, in depth compliance reviews, adding that some lenders could even lose out on future incentive payments if they did not improve the way they were towing the Treasury line.

"None of this is acceptable," he told the Senate Appropriations Sub-Committee. "We are committed to making sure that servicers [lenders] hold up their end of the bargain," Geithner added during his hard-hitting speech.

The Appropriations Sub-Committee would have been only too aware yestarday that, thus far, HAMP has helped just 200,000 borrowers with permanent loan modifications. This is miserably short of the 3 million plus American households who were supposed to benefit.

Moreover, millions more homeowners are expected to fall victims to foreclosure in the next two or three years.

"I want to be clear that we do not believe servicers are doing enough to help homeowners, not doing enough to help them navigate the difficult and often frightening process of avoiding foreclosure," Geithner emphasised. "They are not responding to the needs of responsible and increasingly desperate homeowners."

Banks and other lenders would like America to believe that they have already bailed millions of distressed borrowers out, often without input from HAMP.

"While we share the Secretary's continued frustration with anecdotes about lost paperwork and mistaken foreclosures, I don't think blanket indictments of an entire industry are helpful," responded Mortgage Bankers Association President John A. Courson. "Nevertheless, the industry is continuing to try and streamline and improve the loan modification process."

In March 2010 Treasury announced incentives to persuade lenders to forgive short-sale under-runs by underwater sellers, and also require them to offer temporary relief to unemployed borrowers. Unfortunately this participation is still largely voluntary, and many banks are still dubious about the principal of forgiveness that would reduce their equities significantly. Moreover, many observers believe that a three month period of grace is still far too short to be of much use. "These changes won't be implemented until the fall, maybe too little, too late," said Senate Majority Whip Richard J. Durbin.

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