The Foreclosure Crisis: What the Democrats are proposing
There has been a call by top Democrats, for President Bush and his Administration, to have the federal governments’ response, to the every growing number of foreclosures nationwide, be coordinated by an adviser appointed by the President.
Democrats are trying to keep pressure on the Administration, to definitively address the ongoing problems in the housing market ( foreclosure crisis). Lead by Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi, democrats are critical of and totally dissatisfied with, the response of the Bush Administration, to the sub prime mortgage crisis.
What Democrats would like to see, and are calling for, is an increase in the funds made available to homeowners, to assist them in avoiding foreclosure. Democrats are also asking, for the home-loan finance companies’ investment portfolio caps, be increased, in an effort to ease the crunch in the mortgage market. Companies like Fannie Mae and Freddie Mac are the ones that will be affected by this proposal. Democrats are giving support, to improving the ability of Fannie Mae and Freddie Mac to buy home loans in high cost areas, by increasing their current $417,000 limit.
Tony Fratto, White House spokesman, has rejected the idea of a special adviser. According to Fratto, Housing secretary, Alphonso Jackson, is the Administrations point man on the issue and he (Jackson) is already abreast of things. Fratto further pointed out, that the inaction of Congress, in passing the necessary legislation, that would reform both Fannie Mae and Freddie Mac, is not helping the situation. The legislation is needed, to also bring about, an overhaul of the Federal Housing Administration, which is a guarantor of loans to low-income borrowers.
Although the government had increased the caps in September for Fannie Mae, they were not enough to satisfy the company or the Democrats. Fannie Mae had requested, a cap increase of ten percent, on its’ mortgage investment portfolio. The government, through the Office of Federal Housing Enterprise Oversight, granted a two percent increase, totaling $735 billion, to both Fannie Mae and Freddie Mac.
The Democrats and the government have differing views on the role of Fannie Mae and Freddie Mac in the mortgage market. Democrats see both government-sponsored companies, as a stabilizing force, citing the fact that foreclosure filings nationwide, have increased by thirty-six percent between July and August, and by over one hundred percent from a year ago. The government believes, that the possible risks, to the financial system are too great to allow these companies to grow any further.
Some homeowners have found it difficult, to get out of their mortgages, because of stiffer prepayment penalties, they are also unable to sell or refinance their homes. It is estimated that, between this year and next year, the initial teaser rates of some two million adjustable-rate mortgages, will change to the higher rates.
Last month, President Bush proposed a new program called FHA Secure, where refinancing loans guaranteed by the Federal Housing Administration, will have expanded eligibility requirements.
This proposal has been seen by critics, as a small relief for homeowners, and would not aid most of the two million adjustable rate mortgages, that will reset between now and the end of 2008.
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Well, I agree that foreclosure has been a rampant case nowadays. And there should be solutions for this. Anyways, thanks for sharing this information. It’s very useful. Great post!