“This is important because the government will control more and more of these assets,” says Mr. White.
On Jan. 26, Wells Fargo, which purchased Wachovia Bank, said it would try to work with 478,000 Wachovia customers to avoid preventable foreclosures. In addition to term extensions and interest-rate reductions, “In geographies with substantial property value declines, we will even use permanent principal reductions,” said Mike Heid, copresident of Wells Fargo Home Mortgage in a statement last week.
And recently, Citibank broke with other lenders in supporting legislation that will allow a bankruptcy judge to modify the principal on a mortgage. The legislation was voted out of a House committee last week.
The banks are also under increasing political pressure. Treasury Secretary Tim Geithner will soon announce a new strategy for reviving the financial system, President Obama said in his radio address Saturday. The administration has already said it will devote between $50 billion and $100 billion of the remaining bank bailout funds towards preventing foreclosures.