Moving Closer to Housing Consensus

The Bush administration and Senate Republicans look more ready to compromise.

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After flatly rejecting proposals from Democratic lawmakers for a government-financed rescue of struggling home buyers, Treasury Secretary Henry Paulson has recently made comments that represent the strongest indication to date that the Bush administration could now be open to such a deal.

"Treasury Secretary Henry Paulson indicated the Bush administration is willing to consider congressional plans to stem foreclosures by expanding government guarantees for mortgages," Bloomberg reports. "'I think you will continue to see flexibility as we learn and go forward,' Paulson said in an interview."

Paulson's housing comments are a shift from last month, when he said proposals to use government funds were a "non-starter and played down concern about homeowners whose houses are worth less than what they owe on their mortgages. House Financial Services Committee Chairman Barney Frank said yesterday that officials are warming to his plan to widen mortgage guarantees.

The full article is here.

Meanwhile in Congress, Republicans in the Senate arrived back in Washington after a two-week-long recess—during which they surely got an earful from constituents worried about free-falling home prices—indicating a newfound willingness to compromise with Democrats on a housing bill.

Although the details of the compromise remain unclear, it could include cash for communities to buy foreclosed properties, mortgage counseling, and tax-exempt bonds to refinance souring loans.

In addition, from today's Washington Post:

"[Senator Chris] Dodd has said he hopes to include a more ambitious plan to permit the Federal Housing Administration to guarantee up to $300 billion in risky mortgages as an inducement for bankers to forgive some of the debt. Under that proposal, lenders would be encouraged to work with borrowers who, because of falling home values, owe more on their mortgages than their homes are worth.

FHA insurance would be available on refinanced mortgages if borrowers could afford the new payments and each loan amount did not exceed 85 percent of the home's current value. Lenders would be required to accept the new loan as full payment on the old mortgage and to forgive any fees and penalties."

The full article is here.

Bush administration

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