Congress is warned: Go easy on lending fix

[CNNMoney]

Congress is warned: Go easy on lending fix

Treasury boss Paulson and Fed chief Bernanke tell House panel what they are doing on mortgage crisis and express concern over some proposals.

By Jeanne Sahadi, CNNMoney.com senior writer
September 20 2007: 1:22 PM EDT

NEW YORK (CNNMoney.com) -- Call your mortgage lender. Make more money available for mortgages to ease the credit crunch. Give borrowers greater protection from predatory lenders.

Those are just a few of the proposed remedies being debated in Washington for remedying the nation's subprime mortgage crisis.

At a House Financial Services Committee hearing Thursday, Treasury Secretary Henry Paulson told lawmakers they can send troubled homeowners one simple but urgent message: "Call your lender or mortgage counselor today."

He noted that 50 percent of foreclosures occur without borrowers ever talking to their lenders, and said that he has gotten reports that lenders have tried to reach distressed borrowers to work out more affordable loan terms. "Yet those calls rarely get returned," he said.

The hearing highlights the challenges facing Congress as it gropes for solutions to the ever-worsening housing problems, which has seen foreclosure filings surge and home prices fall. Since the peak of the housing market in early 2006, national home prices have fallen 6.5 percent and are expected to fall further in the next year.

Lawmakers face political pressure to take action. But, at the same time, they are being warned by top economic officials like Paulson and Federal Reserve Chairman Ben Bernanke that some solutions could end up perpetuating risky lending practices that created the subprime mess in the first place.

Bernanke, in written testimony Thursday, warned lawmakers to be careful in the steps they take.
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http://money.cnn.com/2007/09/20/real_estate/bernanke_house_testimony/index.htm