USA: Even as U.S. Treasury announces new plans/home-owners continue to struggle with foreclosures

Record ID: 851804

  • Title: USA: Even as U.S. Treasury announces new plans/home-owners continue to struggle with foreclosures
  • Date: 26th November 2008
  • Summary: NEW YORK CITY, NEW YORK, UNITED STATES (FILE) (REUTERS) VARIOUS OF SHOPPERS AT A CLOTHING STORE VARIOUS OF A CUSTOMER AT A AUTOMOBILE STORE NEW YORKERS ON THE STREET VARIOUS OF PEOPLE SHOPPING AT DIFFERENT STORES VARIOUS OF AN EXXON GAS STATION
  • Embargoed: 11th December 2008 12:00
  • Keywords:
  • Location: Usa
  • City:
  • Country: USA
  • Topics: Domestic Politics
  • Reuters ID: LVA87IIFPQRVMJ9GMSE7O2QDE5TG
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  • Story Text: Washington D.C. is taking extraordinary measures to get consumer lending markets working again. U.S. Treasury Secretary Henry Paulson on Tuesday (November 25) announced a new plan out of the Treasury and the Federal Reserve. According to this plan, $600 billion USD will be used to buy mortgage-related debt and securities and $200 billion USD to back financing for other forms of lending including credit cards, auto purchases, and loans for students and small business.

    "Today's announcement by the Fed that it will purchase direct debt obligations of Fannie Mae, Freddie Mac and the federal home loan banks and also mortgage backed securities guaranteed by Fannie, Freddie and Ginnie Mae underscores our support for the housing market. Nothing is more important to getting through this housing correction than the availability of affordable home mortgage finance," Paulson said at a news conference.
    Casting off - or guaranteeing against - bad debt should encourage lenders to start lending again, according to David Resler, chief economist at Nomura Securities.

    "I think it means that they may be able to more readily get mortgage credit than has been the case in recent weeks. It remains to be seen though whether it will have the most visible effect on mortgage markets by lowering mortgage rates and by enabling borrowers who qualify to gain access to that money," said Resler.
    But through the country, home-owners continue to struggle with foreclosures becoming increasingly common. In New York, also on Tuesday, members of ACORN, a large community organization of low and moderate income families, protested outside bank Morgan Stanley.
    Their protest was primarily targeted at Saxon Capital Inc., a mortgage company acquired by Morgan Stanley in 2006. ACORN members insisted that Saxon is too aggressive with foreclosures and doesn't give clients enough of a chance to re-negotiate the terms of their loans.

    "Saxon has been just unbelievably bad at dealing with our clients to the point where they're just refusing to work with clients who can pay at a reduced rate. Instead, they're deciding to foreclose on them and that's a consistent problem at Saxon. Last year, almost a quarter of their sub-prime loans ended in foreclosure. That's the second highest rate in the country," said Evan Thies, a spokesperson for ACORN.
    Thies said that Saxon should put a hold on foreclosures and try and implement long-term modifications for all Saxon borrowers. ACORN also presented Morgan Stanley / Saxon the "Turkey of the Year 2008" award for what they insisted was the company's "contributions" to the "nation's foreclosure crisis."
    One of the protesters, Rico Lumabam, explained that he had a home loan from another mortgage company but that his problems were similiar to those who had their loans from Saxon. He has a home in Belrose, Queens and says he is troubled by the possibility of a foreclosure.

    "Although I don't have with this company but like I said I have the same scenario and what I'm trying to do is just to see if they can help us adjust our loans in an affordable way so that I can keep my three kids, my family in the house."
    Meanwhile, home prices saw another record slide in September, according to the S&P Case Shiller Index. And tightening credit choked-off consumer spending in the third quarter; leading to a deeper economic slump than previously announced. A rebound in November consumer confidence from record lows went largely overlooked.
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