WASHINGTON (Reuters) – The Bush administration is finalizing a plan to rescue thousands of homeowners facing foreclosure by helping them refinance into more affordable loans, the Washington Post reported in its Saturday edition.
The proposal is aimed at assisting borrowers who owe their banks more than their homes are worth due to declining home prices, the Post reported, citing unnamed government officials.
If enacted, it would mark the first time the White House has committed federal dollars to help the most hard-pressed borrowers.
Under the plan, the Federal Housing Administration would encourage lenders to forgive a portion of these loans and issue new, smaller loans in exchange for the backing of the U.S. government, the Post said.
Two leading Democratic lawmakers have recently proposed a similar program to expand the FHA so that it absorbs more failing mortgages once lenders have erased some of the loan amount.
Sen. Christopher Dodd, chairman of the Senate Banking Committee, and Rep. Barney Frank, chairman of the House Financial Services Committee, are expected to push their FHA plan when lawmakers return to Washington next week.
Bush administration officials told the Post that they believe they can accomplish some of the same goals of the legislation through regulatory changes, though important details need to be nailed down.
Administration officials told the Post they opposed some aspects of Frank’s legislation, including a provision to spend $10 billion buying vacant foreclosed homes.
The plan could dampen criticism from Democrats, who say the administration has so far been more concerned with helping Wall Street than with aiding those who are losing their homes in the foreclosure crisis, which threatens to push the economy into a deep recession.
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