Treasury Backs Lenders' Plan for Homeowners in Distress | Voice of America - English
US Treasury Secretary Henry Paulson Tuesday endorsed measures mortgage companies to help delinquent homeowners in danger of losing their homes.
Paulson says he is endorsing the mortage companies' plan to offer delinquent borrowers an extra 30 days to arrange modifications on their mortgage loans. "Six of the largest servicers, who represent 50 percent of the mortgage market are announcing Project Lifeline, a targeted outreach to homeowners 90 days or more delinquent, that may lead to a pause in the foreclosure process," said Henry Paulson. Paulson maintains the US economy is not in a recession and the housing slump will not lead to a significant downturn. But with credit markets still not functioning smoothly six months after the bad loan problem surfaced, some experts worry that financial institutions have not yet disclosed the full extent of their losses. Joseph Mason teaches finance at Philadelphia's Drexel University. "There's one question on everyone's minds," said Joseph Mason. "Where are the losses? And until they get the answer to that question, they [big global investors] are not going to invest funds in markets." Mason spoke at a housing conference sponsored by Washington's Hudson Institute. Another participant, asset manager Sean Egan, says capital markets lack confidence in the reliability of data they receive from credit rating agencies. "There is a lot of sand in the market," said Sean Egan. "There is a lot of friction in the market. You have to get rid of it. We really have to address the problem [of accurate data]." Much of the problem is focused on the sale of securities linked to subprime U.S. mortgage loans. Credit agencies often said those securities, which were sold around the world, carried little risk, even though it is now clear they have little or no monetary value.