"By calling for an immediate administrative action to allow the FHA to guarantee loans for borrowers who have fallen behind on their mortgage payments, the president is moving quickly to address the problems of home owners who are facing foreclosure," Brian Catalde, president of the National Association of Home Builders, said in a statement Friday afternoon.
President Bush has proposed a plan to help delinquent borrowers avoid foreclosure.
Acknowledging the strain the subprime sector has placed on the mortgage market, the administration called on Congress to pass pending reform legislation for the Federal Housing Administration, according to a summary of his plan released by the White House.
In addition, "FHA-Secure" will be launched. The program will help borrowers who have good credit but have become delinquent on their mortgage as a result of an increase to their mortgage payments. It would also utilize risk based pricing on FHA premiums.
|White House photo
of President Bush
"For the first time, FHA will be able to offer many of these homeowners an option to refinance their existing mortgage so they can make their payments and keep their homes," the White House statement said.
But Bush was clear that there will be no federal bailout of troubled lenders or of borrowers who bought a home they knew they could not afford, according to a transcript of his statements issued by the White House. While the problems in the subprime market may be tremendous for affected borrowers, they are still modest in relation to the size of the U.S. economy.
The president's plan was immediately endorsed by the National Association of Realtors, which issued a statement indicating it would continue to push Congress "to enact other FHA program changes that will help ease the current crisis and protect consumers."
"FHA can play a crucial role in helping stranded borrowers keep their homes," the Mortgage Bankers Association responded in its own press release. "It is essential that the Federal Housing Administration have the tools and flexibility to adjust its products and programs to meet the evolving needs of borrowers."
Bush is also proposing a temporary change to the tax code that would stop taxing foreclosed borrowers for charged off deficiency balances when their homes sell for less than the mortgage balance, his statement said. Bills have already been introduced into both houses of Congress proposing the tax relief.
Alphonso Jackson, secretary of the U.S. Department of Housing and Urban Development, and Treasury Secretary Henry Paulson will reach out to community groups, servicers and government sponsored enterprises to identify and help borrowers facing potential hardship, according to the White House.
HUD will also propose reforms to the Real Estate Settlement Procedures Act this fall that would promote comparison shopping by prospective borrowers, limit increases to closing costs and improve disclosures, the administration's statement said.
A presidential council on financial literacy will reportedly be created, while a working group lead by Paulson will examine the role of credit ratings agencies and the securitization process.
"The President's attention to turmoil in the mortgage markets and to the plight of homeowners facing foreclosure will encourage Congress to take the needed steps to reform FHA and help keep borrowers who face difficulties making their mortgage payments in their homes," MBA Chairman John M. Robbins said in that group's statement. "Many of the proposals President Bush rolled out today are ones for which we have long advocated, even before the recent troubles in the subprime mortgage market."
The "mortgage banking industry stands ready roll up its sleeves and get to work with all stakeholders to help stem the tide of rising foreclosures," MBA added. "Every foreclosure is a tragedy. For the homeowner, for the lender and for the community."
The president said at today's press conference that the administration will continuing working towards improvements to the mortgage marketplace -- an important segment of the U.S. economy.
"All the steps I've outlined today, we will deliver help and hope to American families who need it," Bush said. "We'll help guard against future problems in the housing sector."
George Hanzimanolis, the president of the National Association of Mortgage Brokers, issued an announcement this afternoon stating, "It is now up to Congress to continue the progress that has been made, and pass legislation that will modernize FHA."