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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Smiling Bob who wrote (164328)	11/14/2008 12:50:19 PM
From: Broken_Clock	Read Replies (2) \| Respond to of 306849

more idiocy AP FDIC says plan could help 1.5 million keep homes Friday November 14, 11:06 am ET By Alan Zibel, AP Real Estate Writer FDIC publishes $24 billion plan to avert 1.5 million foreclosures by end of 2009 WASHINGTON (AP) -- Publicly breaking with the Bush administration's official stance, the Federal Deposit Insurance Corp. proposed Friday to use $24 billion in government funding to help 1.5 million American households avoid foreclosure. ADVERTISEMENT The FDIC posted the plan on its Web site two days after Treasury Secretary Henry Paulson rejected the idea of using money from the $700 billion bailout of the financial industry to pay for such a proposal. A Treasury spokeswoman declined comment Friday. The agency's plan would guarantee 2.2 million modified loans -- mainly risky loans made to borrowers with weak credit or small down payments -- through the end of next year. Borrowers would get reduced interest rates or longer loan terms to make their payments more affordable. "If we can avoid those foreclosures, then you will get more stability in the housing market," said Michael Krimminger, a senior adviser to FDIC Chairman Sheila Bair, said in an interview Thursday. The FDIC says the government's backing will make the lending industry more willing to modify loans because taxpayers will absorb half of the losses if the borrower defaults again. Also, loan servicing companies, which collect and distribute mortgage payments, would be paid $1,000 for each loan they modify. Even if a third of borrowers default again on their modified loans, 1.5 million homes would still be saved, the FDIC says. Under the agency's plan, monthly payments shouldn't total more than 31 percent of homeowners' pretax monthly income. The FDIC says its plans should apply to an estimated 4.4 million loans that are likely to become delinquent though the end of next year. That estimate excludes loans held by mortgage finance companies Fannie Mae and Freddie Mac, which on Tuesday launched their own loan modification program modeled after the FDIC's effort at failed IndyMac Bank. The agency has been an aggressive proponent of efforts to alleviate the foreclosure crisis. FDIC officials sounded early warnings about a rise in defaults among risky loans, and have repeatedly reaped praise from Congressional Democrats. After taking over failed IndyMac Bank of Pasadena, Calif over the summer, the FDIC launched a loan modification plan in which borrowers receive interest rates of about 3 percent for five years. That plan was used as a model for a loan modification plan announced Tuesday by mortgage finance companies Fannie Mae and Freddie Mac. Both of those plans reduce interest rates so borrowers aren't paying more than 38 percent of their pretax income on housing expenses.