Sen. Charles Schumer, D-N.Y., has written letters to the Big Four accounting firms asking what they are doing to let their financial institution clients know about waivers on mortgage accounting standards that could let borrowers refinance their loans.
In July, Securities and Exchange Commission Chairman Christopher Cox informed House Financial Services Committee Chairman Barney Frank, D-Mass., that FAS 140 rules allow mortgage lenders to modify the terms of loans when a default is "reasonably foreseeable." The Financial Accounting Standards Board reached a similar conclusion in June.
But many lenders are continuing to claim that the rules on mortgage-backed securities require them to wait 30 days after the borrower defaults before they modify the terms of the loan.
Schumer wants the Big Four to make sure financial institutions are aware of the SEC interpretation to cut down on the number of foreclosures of sub-prime mortgages, according to Reuters. He noted that foreclosures are up 80 percent in New York City since February. Schumer also criticized companies that continue to advertise sub-prime loans to consumers despite the growing number of foreclosures.
