U.S. banks tell lawmakers will help homeowners, for now

By John Poirier

July 15, 2010 Updated Feb 11, 2009 at 8:00 PM CDT

WASHINGTON (Reuters) - The biggest U.S. banks
Wednesday agreed to halt foreclosures on delinquent homeowners
for at least a few weeks, until the U.S. government launches a
$50 billion aid program for homeowners.

At a congressional hearing on the use of government aid to
banks, lawmakers sought commitments from the chiefs of eight
big financial institutions to temporarily stop foreclosure

Pleas from lawmakers came one day after U.S. Treasury
Secretary Timothy Geithner unveiled a bank rescue package
including a plan to use $50 billion to save troubled homeowners
by lowering monthly payments.

The Treasury gave few details on how the plan would work,
and said a broader housing aid program could be announced as
early as next week.

The U.S. Office of Thrift Supervision, which largely
regulates mortgage lenders, urged its regulated institutions
Wednesday to halt foreclosures until a government plan is in

"That would be a tremendous gesture to say you will not
foreclose on any American's home until we put the plan in
place," Rep. David Scott, a Georgia Democrat, said. "Will you
do that? Could I get a yes-yes here?"

Bank of America Corp Chief Executive Kenneth Lewis
agreed to a temporary moratorium, but with limits. "If we could
put a timeframe on it and not just leave it open-ended, say it
is two weeks or three weeks, we could do that," Lewis said.

Scott responded: "Three weeks, that is good news."


The hearing provided a venue for lawmakers who expressed
outrage that the eight banks, which received a combined $176
billion from the government, have done little to bolster
consumer lending and help homeowners.

Citigroup Inc Vikram Pandit said his bank is willing
to halt foreclosure procedures for some mortgage holders.

"There are two types of homeowners," Pandit said. "There is
the investor, and there is the person living in the home. We
will commit to making sure that people stay in their houses as
part of the moratorium."

House Financial Services Committee Chairman Barney Frank,
who seeks a moratorium, predicted at the end of six hours of
testimony that more than 95 percent of U.S. banks will put
foreclosures on hold until the Treasury rolls out a housing

"I expect it to be a virtual moratorium on foreclosures
until we see the Geithner plan," Frank told reporters.

Banks that service mortgages sold to investors have long
complained about lawsuits they face if they modify mortgages
held by others. They welcomed legislation being crafted by
Frank aimed at providing banks with legal protections.

"Help is on the way in that regard," the Massachusetts
Democrat said.

John Stumpf, chief executive of Wells Fargo & Co,
said his bank is already modifying mortgages including those
held by Wachovia Corp, which Wells Fargo bought Dec 31.

"We have already put a moratorium in on those homes where
we are the investor through Wachovia," Stumpf said. "We have
contractual arrangements with our investors. I can't commit to
you" on those investor-owned mortgages, he said.

Goldman Sachs Group Inc Chief Executive Lloyd
Blankfein said his company is modifying mortgages without the
legal protections.

"We are (modifying mortgages) and reducing principal
because that is the best way of recovering value," he said.
"People tend to stay in houses and support their payments when
they have equity."
(Reporting by John Poirier; editing by Carol Bishopric)

To submit a comment on this article, your email address is required. We respect your privacy and your email will not be visible to others nor will it be added to any email lists.