Profitwise News and Views

May 2004 Issue
Special Edition

• Neighborhood Housing Services of Chicago Home Ownership Preservation Initiative


• Remarks by Michael H. Moskow, President and CEO, Federal Reserve Bank of Chicago


• Remarks by Richard M. Daley, Mayor, City of Chicago


• Alicia Williams, Vice President, Consumer and Community Affairs, Federal Reserve Bank of Chicago


• John G. Markowski, Commissioner, City of Chicago, Department of Housing


• Bruce Gottschall, Executive Director, Neighborhood Housing Services of Chicago


• Bruce Paradis, President and Chief Executive Officer, GMAC-RFC


• Steve Paton, Vice President, Chase Manhattan Mortgage Corporation


• Richard Monocchio, First Deputy Commissioner, City of Chicago, Department of Housing


• Conclusion


• Neighborhood Housing Services Programs


• May 2004 Issue, Special Edition (PDF,137KB)

Bruce Paradis
President and Chief Executive Officer, GMAC-RFC

As a subsidiary of GMAC, Mr. Paradis pointed out that RFC plays a different role than typical lenders in the community. It does not have storefronts, but buys loans from the people who make loans. RFC purchases loans that are made by mortgage bankers and mortgage brokers. They then fund these loans with proceeds of securities sales. RFC is a leading issuer of asset-backed securities. In 2003, RFC funded approximately $50 billion in mortgages. Since RFC started in the early 1980s, it has issued over $200 billion worth of securities, mostly funding "nonconforming" mortgages, including loans to households with lower credit scores that are often called subprime mortgages, and priced to reflect the added risk associated with a blemished or insufficiently long credit history.

Foreclosure Prevention

Mr. Paradis estimated that in 2003, RFC will lose $500 million due to foreclosures. In the past, the only option offered to a customer facing foreclosure was to increase the payment to offset past delinquency. Today, RFC aims to partner in Chicago with groups who share a common objective, to reduce losses attributable to foreclose. When foreclosure is the only option, RFC will turn over properties to NHS rapidly, and will use creative solutions to keep families in their homes whenever possible. Partnering with NHS, RFC plans to determine homeowners' needs, and craft further methods to keep families in their homes.

Mr. Paradis pointed out that the HOPI pilot program is in part a learning process. The long-term objective is to build a scalable model that can be replicated by other lenders while addressing the needs of lenders, businesses, and financially distressed homeowners. Ultimately, the goal is to extend the model to other cities facing high foreclosure rates. An integral part of the RFC model is an alliance with credit counseling agencies that began in 2001. When borrowers are delinquent over 60 days, they are referred to a reputable credit counseling agency. RFC pays the credit agency $100 per client.

"I'd like to thank NHS and the City of Chicago for the wonderful partnership experience. We will be back year after year to talk about the goals we set and the progress of the programs," stated Mr. Paradis.