Bush Promotes Mortgage Bailout
While denying that that he’s doing what he’s doing, a George W. Bush trademark, the president is coming up with ways to bailout banks and speculators in the current housing market.
Both Bernanke and Bush emphasized that their actions were not aimed at bailing out investors who had made bad decisions.
“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,” Bush said in the Rose Garden. “Yet there are many American homeowners who could get through this difficult time with a little flexibility from their lenders or a little help from their government.”
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Bush’s proposals unveiled Friday are designed to help combat those defaults. They would make it easier for borrowers now holding adjustable rate mortgages that are resetting to higher monthly payments to refinance those loans using the resources of the Federal Housing Administration. The FHA is a Depression-era agency created to help low and moderate-income Americans afford homes.
Under the Bush proposal, which FHA officials said would take effect immediately, an estimated 60,000 homeowners who have fallen behind on payments because their mortgages have reset would be able to refinance with FHA-insured loans. That marks a significant change because FHA does not now insure refinanced loans from borrowers who are currently delinquent.
“This means that many families who are struggling now will be able to refinance their loans, meet their monthly payments and keep their homes,” Bush said.
To qualify for the new program, being called FHA Secure, a borrower will have to prove the original loan was being repaid until it reset to a higher rate and they must have 3 percent equity in the home. The FHA does not supply the mortgage loan but it guarantees loans extended by banks and other lenders.
An FHA guarantee is a taxpayer guarantee. If a mortgage holder on an FHA loan defaults, the taxpayers will foot the bill.
There are plenty of speculators who will fit the requirements for the refinancing and loan guarantees. That will be a bailout for them as well as the banks and mortgage companies that made them loans.
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