Mortgage aid could come with more Treasury cash
The U.S. Treasury Department’s appeal on Friday for the final $350 billion of a market bailout fund could finally push administration officials to finance a broad mortgage modification plan endorsed by a senior bank regulator.
Federal Deposit Insurance Corp Chairman Sheila Bair’s plan to spur mortgage modifications with a government promise to share the costs of redefaulting loans has gotten strong support from Democratic lawmakers — the same people who could block the second half of the $700 billion financial rescue fund.
That power gives Bair’s plan a chance to be realized quickly, as a condition of releasing the funds under the Troubled Asset Relief Program (TARP).
House Financial Services Chairman Barney Frank has said Congress would have little appetite for releasing the money if the U.S. Treasury failed to do more to prevent foreclosures.
Bair argues that a widely applied loan modification plan serves the best interests of borrowers, lenders and the economy as a whole. She has warned that housing prices will not stabilize until policymakers halt the flood of foreclosures.
But Treasury officials have brushed aside Bair’s proposal, estimated to cost about $24 billion. Instead, Treasury Secretary Henry Paulson has argued that financial rescue funds are best spent trying to soothe broader financial markets.
“They have consistently missed the mark in terms of dealing with the foreclosure crisis,” said John Taylor, head of the National Community Reinvestment Coalition instant payday loan no telecheck.
Taylor said he buttonholed Paulson at a Treasury holiday party last week and made his case that the rescue fund should directly help homeowners.
“He said, ‘We’re just going to have to leave that to the next administration,’” Taylor remembered of the conversation. “There are a quarter million new foreclosures a month so it can’t wait that long.”
INDIRECT AID
Paulson has tried to coax the mortgage industry into easing loan terms on a voluntary basis through Hope Now - a coalition of large housing finance companies.
Policymakers have also used government-run mortgage finance companies Fannie Mae and Freddie Mac, as well as purchases of mortgage-backed investments by the Federal Reserve, to help lower borrowing costs.
Some stressed borrowers are finding cheaper loans but the impact of the efforts so far has been limited.
So far, critics of Treasury’s trickle-down approach have howled from the sidelines but Congress will now have a say since lawmakers can block further rescue funds.
Frank, a Massachusetts Democrat, has said it is “essential” for Treasury to use TARP funds for foreclosure mitigation.
Filed under: money by Wolf