Washington – The Federal Reserve and other banking regulators issued special guidance Tuesday urging loan service companies to work with borrowers in danger of defaulting on their home mortgages.
The new guidelines are not mandatory, but the regulators expressed the hope that companies that collect payments on mortgages would heed the advice.
Sheila Bair, Federal Deposit Insurance Corp. chairman, said that mortgage collectors have the authority under existing accounting and tax rules to help deserving borrowers.
“More and more consumers with subprime and hybrid mortgage products are facing the very real prospect of losing their homes through foreclosure as their payments reset and become unaffordable,” she said in a statement. “It is vital that mortgage servicers work proactively with borrowers facing much higher payments as their interest rates reset.”
An estimated 2 million adjustable-rate mortgages are slated to reset by the end of 2008.
