Ahead of the Bell: Mortgage hearing

As the mortgage crisis deepens and the government joins with the lending industry in a new effort targeting struggling homeowners, Congress is examining the roles played by investors, lenders and loan servicers in the process.
Representatives of those three sectors are scheduled to testify at a House Financial Services Committee hearing Wednesday morning.
Democratic lawmakers have expressed frustration with the scope of industry cooperation. Committee Chairman Barney Frank, D-Mass., and five other Democrats accused hedge fund investors of blocking mortgage modifications.
"For the hedge fund industry, which has flourished for much of the past decade, to take steps so actively in opposition to what is currently in the national economic interest is deeply troubling," they said in a recent letter to industry representatives.
On Tuesday, the government and the mortgage industry mounted the most sweeping effort yet to help troubled homeowners by speeding the process for renegotiating hundreds of thousands of delinquent loans held by Fannie Mae and Freddie Mac.
The Federal Housing Finance Agency, which seized control of the two mortgage finance companies in September, announced the plan along with other government and industry officials. Officials said they hoped the new approach, which goes into effect Dec. 15., will become a model for loan servicing companies, which collect mortgage payments and distribute them to investors.
Expected to appear at Wednesday's hearing are: Benjamin Allensworth, senior legal counsel of the Managed Funds Association, which represents hedge funds; Thomas Deutsch, deputy executive director of the American Securitization Forum, representing Wall Street institutions that transform mortgages and other debt into bonds that are traded; Michael Gross, managing director of loan administration loss mitigation at Bank of America Corp.; and Molly Sheehan, senior vice president in the home lending division at JPMorgan Chase & Co.
JPMorgan Chase & Co. last month expanded its mortgage modification program to an estimated $70 billion in loans, which could aid as many as 400,000 customers. The New York-based bank already has modified about $40 billion in mortgages, helping 250,000 customers since early 2007. Bank of America has said that starting Dec. 1, it will modify an estimated 400,000 loans held by newly acquired Countrywide Financial Corp. as part of an $8.4 billion legal settlement reached with 11 states in early October.
The government said last week it expects that only 20,000 troubled borrowers will apply to refinance into more affordable home loans by next fall under a new mortgage aid program enacted by Congress over the summer.warhammer goldThe $300 billion "Hope for Homeowners" program was launched Oct. 1. Designed by lawmakers eager to respond to the mortgage crisis, the Congressional Budget Office had projected it would let 400,000 troubled homeowners swap risky loans for conventional 30-year fixed rate loans with lower rates.
But the early results have been discouraging: the government received only 42 applications in the program's first two weeks, according to the Federal Housing Administration.