Bush to Offer Aid to Homeowners
Offering federal help for strapped mortgage holders, President Bush is proposing to aid hundreds of thousands of borrowers hard hit by the housing slump.
The president on Friday was to talk about several initiatives and reforms to help homeowners with risky mortgages keep their homes, a senior administration official said Thursday. Bush also was to discuss efforts to prevent these kinds of problems from arising in the future.
The official said Bush will direct Treasury Secretary Henry Paulson and Housing Secretary Alphonso Jackson to work on an initiative to help troubled mortgage holders get services and products they need to keep them from defaulting on their loans. The official spoke on condition of anonymity to discuss details of the initiatives ahead of the presidential event.
Bush also planned to:
- Urge Congress to pass Federal Housing Administration overhaul legislation that would give the FHA more flexibility in assisting mortgage holders with subprime mortgages.
- Pledge to work with Congress to reform the tax code to help troubled borrowers rework their loans.
- Call for rigorously enforcing predatory lending laws and strengthening lending practices.
More details here.
(Link via Real Estate Bloggers)
September 1st, 2007 at 5:45 pm
I think the President understands the political fallout of this situation, but not it’s economic or financial consequences. It is a lot of trouble to go through to protect people from the consequences of their own financial decisions. The reason these loans were classified subprime is 1) They were made to borrowers with “less than perfect” credit; 2) They were made with little down payment, so the collateral pledged was not very secure; 3) They were made without verification of assets, income, or employment, so the expectation of loan payments was guesswork at best; and to top it off, they were made at the crest of a real estate boom (bubble) with interest rates at 40 year lows…they were imperfect loans priced for perfection. The problem wasn’t that money was lent to these borrowers, the problem is that it wasn’t priced right…it was wrong for the borrowers and wrong for the investors.
Now we are facing proposals to change the rules, get the
Federal government involved, fire up the old FHA again…none of which are dealing with the real problem - these loans are RISKY. Risky loans need to be priced so that borrowers without the capacity to repay don’t take out the loans, and investors who provide the capital are being compensated for their risk. Government proposals take the risk out of the market (where it belongs) and pass it onto American Taxpayers. We will end up subsidizing interest rates that risky borrowers pay, and eating the losses in the event of default…all without compensation. Land of the free…lunch?
Leave a Comment
You must be logged in to post a comment:
Register Here or Log in Here.