Let's hope that this is strictly for entertainment . I can't believe this is even being discussed ... man are we in trouble if this is the solution that they come up with .
I'm sure the banks are quite willing to give up first position LOL!! and never mind that more public money is being used to prop up houses that are upside down in value against loan , with an owner has little equity left in it.
Bair Proposal Seeks
Government Loans
To Aid Homeowners
By DAMIAN PALETTA
April 29, 2008 7:46 p.m.
WASHINGTON -- Federal Deposit Insurance Corp. Chairman Sheila Bair is finalizing a legislative proposal that would allow the Treasury Department to make direct loans for close to one million homeowners in the latest government initiative to stabilize the slumping mortgage market.
The plan would authorize the new government loans so that borrowers could pay down up to 20% of the principal they owed on their mortgage, according to a confidential draft of the plan obtained by The Wall Street Journal. That would mean that if a homeowner owed $100,000 on a mortgage, the government could loan up to $20,000 to pay down the principal.
"This approach is scalable, administratively simple, and will avoid unnecessary foreclosures to help stabilize mortgage and housing prices," the draft said.
Ms. Bair, a White House appointee, has raised concerns that existing efforts to stem mortgage foreclosures are not effective enough. One difference between her plan and another measure advancing through Congress is that the FDIC proposal would not provide insurance for refinanced loans. Instead, it would offer smaller loans to make existing loans more affordable.
According to the draft, borrowers would still be required to pay their mortgage and the new government loan, but they would not have to make any payments on the Treasury loan for the first five years. During that time, investors in the loans would pay interest to Treasury, and after five years homeowners would begin repaying the Treasury loan at fixed Treasury rates.
For loans to qualify, mortgage investors would "pay Treasury's financing costs and agree to concessions on the underlying mortgage to achieve an affordable payment."
To modify one million loans, the FDIC estimated it would require a $50 billion public debt offering. Treasury would recoup the costs because it would have the first priority to recover funds if homes are sold, refinanced, or if the borrower goes into default.
The plan would need to be approved by Congress, which is considering several other proposals to prevent foreclosures. |
