Outgoing FDIC Chairwoman: Loan Servicers ‘Didn’t Think Borrowers Were Worth Helping’; Felt Lied To, Calling Promises To Help Homeowners "Happy Talk"

The ProPublica Blog reports:

• Outgoing Federal Deposit Insurance Corporation Chairwoman Sheila C. Bair's revealing exit interview by the New York Times' Joe Nocera has generated plenty of buzz. But while the interview provided a comprehensive look at Bair's role from 2006 to 2011, what caught our attention was her characterization of the foreclosure crisis. Bair said that the mortgage's industry's reluctance to provide mortgage modifications stems in part from the industry's "disdain for borrowers."



• "I think some of it was that they didn't think borrowers were worth helping," she said. While Bair said that President Barack Obama's "heart is in the right place," she criticized his economic team for taking controversial steps to aid banks while, in Nocera's words, being "utterly unwilling to take any political heat to help homeowners."

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• "After doing some arm-twisting," Nocera wrote, "Bair felt she had extracted a commitment" that servicers would try to restructure mortgages—in particular, that they would be willing to freeze adjustable-rate mortgages at the original payment level, rather than the higher "reset rate," as Nocera reported in 2007.



• But later that year, after the housing market had crashed, Bair learned from a survey of mortgage servicers that those conversations had been ignored. "It showed that like 1 percent of those reset mortgages were being restructured," Bair told Nocera. "They would just push people into foreclosure."



• She told Nocera that she felt that she had been lied to, and that what mortgage servicers had promised in their meetings with the FDIC had simply been "happy talk."

For more, see FDIC Chairwoman: Mortgage Industry ‘Didn’t Think Borrowers Were Worth Helping’

For Joe Nocera's NY Times column, see Sheila Bair’s Bank Shot.