Treasury Chief Calls Foreclosures Inevitable After Lax Lending Standards

July 9, 2008 10:49 a.m. EST

Washington, D.C. (AHN)- The foreclosure of thousands of homes across the U.S. was inevitable, according to Treasury Secretary Henry Paulson.

Because of the lax lending standard tolerated during the housing boom, even those who could not afford to purchase homes were allowed to buy. The practice led to the current situation in which foreclosure procedures, which could not be stopped, were initiated on 1.5 million houses in 2007.

"Many of today's unusually high number of foreclosures are not preventable... There is little public policymakers can, or should, do to compensate for untenable financial decisions," Paulson said Tuesday at a mortgage lending forum in Virginia.

An additional one million foreclosure proceedings have been initiated since January, economists estimated.

Paulson acknowledged the positive contribution of the Hope Now alliance in finding a solution to the mortgage crisis by pushing lenders to offer loan modifications or refinancing for house buyers who could afford new terms and keep up with monthly amortizations.

About 1.7 million troubled homeowners have been assisted by the alliance in restructuring their loans, which permitted them not to lose the roof over their heads.