White House Expanding Housing Aid Plan
The Bush administration is looking at ways to expand its aid to homeowners at risk for falling behind on their mortgages amid the stubborn housing and credit crisis that has gripped markets since last year, according to
The Wall Street Journal
.
The plan would help 100,000 homeowners reduce the amount they play monthly, the paper said, citing unnamed administration officials. Lenders and investors would be asked to write down the value of the mortgages and the federal government, through the Federal Housing Administration, would assume the risk of default, the paper said.
The burgeoning plans are a response to more aggressive proposals being floated by congressional Democrats. Rep. Barney Frank (D., Mass.) last month
that would allow the Federal Housing Administration to insure and guarantee refinanced mortgages that have been significantly written down by mortgage holders and lenders.
Bush's plan would provide FHA backing to loans issued by lenders who agree to write down the values of the debt whose underlying asset, or property, has fallen in value. Lenders would have to agree to write down loans to between 90% to 97% of the new property values, depending on the borrower's risk profile, the
Journal
said. The program would only be open to owner-occupied homes possessed by reasonably creditworthy borrowers, the paper said.
Frank's plan would allow the FHA to provide up to $300 million in new guarantees to allow one million to two million borrowers into more affordable mortgages. Proceeds from those loans would go to borrowers or lenders to pay off mortgages. The plan also would allocate $10 billion to buy and rehabilitate vacant and foreclosed homes to have people occupy.
The Bush administration won approval from Congress for an
that offers consumer tax rebates, business tax breaks and other subsidies, as well as raising the limit on the dollar amount of loans government-sponsored mortgage giants
Fannie Mae
(FNM)
and
Freddie Mac
(FRE)
can buy.
The White House, however, has favored more
private-market-oriented methods
in its approach to dealing with the housing crisis.
This article was written by a staff member of TheStreet.com.