NY Banking Regulator Calls for Treasury's Help in Loan Modifications
The State of New York Banking Department superintendent Richard H. Neiman urged the U.S. Treasury Department to speed systemic loan modifications. In a speech given Thursday to the New York Bankers Association, Neiman discussed New York's role in regulatory reform and steps that can be taken to help stabilize a teetering housing market. "The current credit crisis has done much to reshape the industry landscape already, and there are lessons learned that should guide us in moving forward," Neiman said. "I am confident that New York and you as members of the industry here will have a large role to play in righting the ship for the entire global financial system." Neiman echoed the statements of FDIC chairman Sheila Bair, who also encouraged the Treasury to use its new authority under the TARP to facilitate modifications through loan guarantees and credit enhancements. Without these modifications, he said, delinquencies and home foreclosures will continue to increase. "Unfreezing credit markets is vital, but lasting stability needs a solution that also addresses the origins of the problem: the escalating numbers of American families who are losing their most valuable asset - their homes," he said. Neiman cited the FDIC's loan modification steps in handling IndyMac Federal Bank, saying "New York has joined with a host of other states in calling on servicers to follow these examples." He also pointed to a recent $8 billion settlement with Countrywide that will see wide-scale loan modifications as another example of a "mass modification" that worked (although the modifications tied to the deal, of course, haven't yet been made). The Treasury can reduce the risk delinquencies and foreclosures by encouraging more lenders and servicers to participate in the Hope for Homeowners program, he said. The effects of that effort would still be a long way off and consumers will continue to suffer foreclosure-ridden neighborhoods and weak state finance, which may lead to job loss throughout New York. "But, I don’t mean to paint a picture that is entirely bleak," Neiman said. "New York banks have been resilient and creative in the face of adverse market conditions. It’s true that financial ratios are down across the board, but the industry in New York as a whole compares favorably with trends for the U.S. and remains well-capitalized." He called the recent restructuring of investment firms -- like the move by Goldman Sachs Group Inc. (GS) to convert to a bank holding company -- "a preview of the regulatory model of the future." Neiman also said he was "encouraged" by the expansion and growth of community banks and credit unions throughout the state, steps he said will bring the Treasury's contribution in stabilizing the state's financial market. Disclosure: The author held no relevant positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade. Editor’s note: To contact the reporter on this story, email firstname.lastname@example.org.