Seal of the Board of Governors of the Federal Reserve System
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.  20551
DIVISION OF BANKING
SUPERVISION AND REGULATION

DIVISION OF CONSUMER AND
COMMUNITY AFFAIRS
SR 08-2 / CA 08-2
March 3, 2008

TO THE OFFICER IN CHARGE OF SUPERVISION AND APPROPRIATE SUPERVISORY AND EXAMINATION STAFF AT EACH FEDERAL RESERVE BANK AND BANKING ORGANIZATIONS SUPERVISED BY THE FEDERAL RESERVE
SUBJECT:  Statement to Financial Institutions Servicing Residential Mortgages on Reporting Loss Mitigation of Subprime Mortgages

The Federal Reserve encourages financial institutions1  that service subprime mortgage loans to report their loss mitigation activities consistent with uniform standards. These financial institutions should consider utilizing the HOPE NOW2  alliance’s loan modification reporting standards for their serviced loans. This standard reporting format will help investors in securitized mortgages, including financial institutions, monitor foreclosure prevention efforts. Consistent loan modification reporting will foster transparency in the securitization market and provide standardized data across the mortgage industry. The Federal Reserve commends the HOPE NOW alliance and encourages financial institutions to cooperate with other ongoing efforts, such as that of the State Foreclosure Prevention Working Group.3

Long-term sustainable loss mitigation techniques that preserve homeownership are generally in the best interest of borrowers, servicers, and investors because such strategies are typically less costly than foreclosure, particularly when applied before default. This statement builds on previous statements issued by the Federal Reserve and the other federal banking agencies to encourage financial institutions to work constructively with residential borrowers who are financially unable to make contractual payment obligations on their home loans.4 

Federal Reserve Banks are asked to distribute this letter to financial institutions supervised by the Federal Reserve, as well as to their supervisory and examination staff. If you have any questions, please contact Virginia Gibbs at 202/452-2521 in the Board’s Division of Banking Supervision and Regulation or David Buchholz at 202/872-4921 in the Board’s Division of Consumer and Community Affairs.

Roger T. Cole
Director
Division of Banking Supervision and Regulation
Sandra F. Braunstein
Director
Division of Consumer and Community Affairs


Cross Reference:
Notes:
  1. For purposes of this statement, the term “financial institutions” refers to state chartered banks and their subsidiaries and bank holding companies and their nonbank subsidiaries.  Return to text
  2. HOPE NOW is an alliance between counselors, mortgage market participants and mortgage servicers to create a unified, coordinated plan to reach and help as many homeowners in distress as possible. The Department of the Treasury and the Department of Housing and Urban Development encouraged the formation of this alliance. Refer to www.hopenow.com or to McDash Analytics, (904) 285-6220, tbarnes@mcdash.com  Return to text
  3. Several State Attorneys General and State Banking Regulators, as well as the Conference of State Bank Supervisors, have formed a State Foreclosure Prevention Working Group. This group has also undertaken a data collection effort to assess the effectiveness of loss mitigation activities.  Return to text
  4. Refer to SR 07-16/CA 07-4, Statement on Loss Mitigation Strategies for Servicers of Residential Mortgages (September 5, 2007), and SR 07-6/CA 07-1, Working with Mortgage Borrowers (April 17, 2007).  Return to text


SR letters | 2008
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Last update: March 3, 2008