Treasury Secretary Henry Paulson said Tuesday that fast-tracking struggling mortgage holders into mortgage modifications is one of the actions the Treasury is facilitating to reduce foreclosures.Speaking before a town hall meeting in Orlando, Fla., Paulson said the Treasury has been encouraging the lending industry to develop a system for moving homeowners who will not be able afford their reset payment rates, but have the ability to continue owning their homes, into sustainable mortgages.
In a recent announcement, the industry said it will be able to fast-track these borrowers into mortgage modifications resulting in a five-year interest rate freeze for some mortgage holders, he said.
Regarding the freeze, Paulson emphasized that it will not be granted across the board. Some borrowers will not be eligible for fast-tracking but will go through a longer process to demonstrate that they can’t afford the mortgage reset. Others may not be able to afford any reasonable mortgage modification, he said.
Paulson also informed those in attendance at the meeting that the industry will report the results of this effort, and Treasury will measure the success of this initiative by the number of foreclosures that are prevented, not the number of mortgages that are modified.
“This plan is neither a silver bullet, nor is it perfect, but it is the best way to deal with the unprecedented volumes [of foreclosures] that threaten to overwhelm the normal functioning of this market,” said Paulson.