Bush’s rescue plan for ARM refugees
TEXT OF STORY
Tess Vigeland: The Bush and Bernanke shows had Wall Street cupping its collective ear today. What’s that you say, Mr. Fed chairman? You stand ready to take additional actions as needed? Well, that’s not exactly a promise to cut interest rates now, is it? And what’s that you say, Mr. President? You’ve got a rescue plan for homeowners facing foreclosure? OK, but your critics warn your remedies may be a tad too little, too late.
Marketplace’s John Dimsdale reports on the debate in Washington over a taxpayer bailout of lenders and borrowers.
John Dimsdale: The White House will allow homeowners who’ve fallen behind on their payments to refinance their mortgages using the government’s mortgage insurance agency, the Federal Housing Administration. That should help some delinquent borrowers avoid foreclosure.
But only first-time homebuyers with good payment records up until a few months ago will be eligible. White House officials say that’s about 240,000 families — a fraction of the more than two million mortgages that will adjust upwards over the next two years.
At his Rose Garden announcement, Bush said the government shouldn’t be rescuing speculators.
President George W. Bush:A federal bailout of lenders would only encourage a recurrence of the problem. It’s not the government’s job to bail out speculators, or those who made the decision to buy a home they knew they could never afford.
Some in Congress, though, are in the mood to do a lot more. Democrats have proposed a billion-dollar rescue fund for low-income borrowers. Another idea is to pay nonprofit organizations to advise delinquent homeowners on how to re-finance with more favorable terms.
Despite the White House’s reluctance to bailout unscrupulous lenders, the Consumer Federation of America’s Allen Fishbein says it’s in the government’s interest to help.
Alleh Fishbein: If we see a run-up in foreclosures, it’s going to affect the whole community. It’s going to affect the next door neighbors through depressed property values and the whole need apparently for higher levels of public service that come from concentrated foreclosures. So everybody’s really in this, one way or another.
President Bush is also asking Congress to allow the FHA to insure bigger loans and reduce downpayment requirements. And he wants temporary tax relief for borrowers trying to renegotiate their mortgage debt.
In Washington, I’m John Dimsdale for Marketplace.
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