|House Democrats have unveiled a plan for the Bush Administration to appoint a mortgage czar. The plan also includes increased funding and a temporary boost to government sponsored enterprise portfolio limits.
The plan, announced by Senate Majority Leader Harry Reid, House Speaker Nancy Pelosi, Senators Chris Dodd and Charles E. Schumer, and Reps. Barney Frank and Carolyn Maloney — all Democrats, is an attempt “to stem the rising tide of home foreclosures created by the subprime mortgage market crisis.”
The politicians are calling on Bush to appoint a special advisor to manage the government’s response to the subprime meltdown, according to the statement.
The group is also requesting an increase in federal funding for HUD-approved non-profits to administer foreclosure prevention programs. The announcement indicated 130,000 foreclosures could be prevented with just $200 million in funding.
The boost in funding was immediately applauded by ACORN — though it is still calling for a bigger effort by servicers to modify loans. The consumer advocate group cited a request from 150 HUD housing counseling intermediaries and housing counseling providers for $150 million in funding as outlined in a pending Senate bill.
The Democrats are also promoting a temporary boost to Fannie Mae’s and Freddie Mac’s portfolio caps — which was quickly commended by mortgage bankers.
“We have been vigorously advocating for an increase in the portfolio caps on Fannie and Freddie as a way to increase liquidity in the market and provide more opportunities for troubled borrowers to refinance into mortgages they can better afford,” Mortgage Bankers Association Chairman John M. Robbins said in a statement today. “OFHEO took a step in that direction last week, but we think a larger move would help a lot more borrowers.”
Last month, Treasury Secretary Henry Paulson testified before the House Financial Services Committee that Freddie’s and Fannie’s requests for an increase to their investment portfolio caps were bad from a public policy perspective — echoing prior administration statements that it would be irresponsible to expand the GSEs without addressing problems in their regulatory structure. Paulson said the limits could be lifted when the companies bring their SEC filings current.
Reid suggested the subprime crisis could eliminate more homeowners than it created and pointed to extraordinary problems being suffered by Hurricane Katrina victims and Nevada borrowers — of which one-quarter are subprime and where one out of every 65 mortgages is in foreclosure.
“Too often, we get lost in a sea of numbers and statistics when we talk about this problem,” Dodd was quoted as saying in the announcement. “But behind each number, behind each statistic, is a young family.”
Dodd noted that the president’s response to the subprime crisis has been plagued with “denial, delay, timidity and incompetence.”
Pelosi called the subprime crisis a national economic emergency.
“The problems facing borrowers and the mortgage markets will take a cooperative effort to solve,” MBA’s Robbins said. “And we are eager to work side-by-side with the regulators, legislators, the executive branch and all other stakeholders to solve them.”
Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com.
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