Given the House vote scheduled for today regarding HR 5830, the legislation which would allow the HUD to insure up to $300 billion in FHA mortgages, you might wonder what the Bush Administration thinks about the foreclosure rescue plan.

President Bush says he will gov/news/releases/2008/05/20080507.html”>veto the legislation if it passes both houses on Capitol Hill: “We are committed to a good housing bill that will help folks stay in their house, as opposed to a housing bill that will reward speculators and lenders. There’s a House alternative that will do the right thing for the American people when it comes to housing.

“I will veto the bill that’s moving through the House today if it makes it to my desk, and I urge members on both sides of the aisle to focus on a good piece of legislation that is being sponsored by Republican members.”

As explained in my column for RealtyTrac.com, the Frank rescue plan would not be cheap for lenders or borrowers; it’s anything but a bailout: In exchange for avoiding foreclosure both borrowers and lenders would pay a heavy price — but less of a price than if a house was lost.

Not surprisingly, the Bush Administration — which has donated hundreds of billions of taxpayer dollars to Wall Street in the form of sweetheart loans — vehemently opposes HR 5830. HUD says the following:

“The Bush Administration’s plan offers strong, market-based incentives for lenders to reduce (”write down”) the principal value of delinquent mortgages. FHA will permit lenders to make arrangements to “fill-in-the-gap” between existing loan balances and the FHA-insured loan amount, such as issuing subordinate liens.”

Alternatively, says HUD, “the House proposal, H.R. 5830, offers little incentive for lenders to write-down mortgages. It mandates principal reductions and does not permit new subordinate liens to be used to pay off some portion of the existing mortgage debt, even if that debt were secured by the value of the property. Existing subordinate lien holders, in particular, are highly unlikely to agree to release liens at a complete loss.”

In other words, investors who bought toxic loans should be protected from loss — but not the borrowers who were screwed with such financing. As to what the Administration has done to help the public, the answer is as close to absolute zero as one could possibly imagine — just look at the soaring foreclosure rates.

HUD says that “since September 2007, FHASecure has helped more than 180,000 homeowners refinance their loans and avoid foreclosure. With this expansion, FHASecure is expected to assist about 500,000 families by the end of the year. Homeowners using FHASecure are, on average, saving $400 a month compared to their previous loans.

“FHASecure has also had a significant and positive impact on the housing market. Since September 2007, FHA has helped pump nearly $68 billion of much-needed mortgage activity into the housing market, $28.5 billion of which was through FHASecure refinancings.”

This is junk. As FHALoanPros.com first reported the FHASecure figures regarding saved homes from foreclosure are fiction. As the New York Times explains:

“Fewer than 2,000 homeowners at risk of foreclosure have been helped by a Federal Housing Administration program that President Bush promised would help homeowners who had fallen behind on their mortgage payments, federal housing statistics show.

“FHA officials have asserted in recent weeks that more than 150,000 people have benefited from the program, which was intended to help troubled homeowners refinance into stable, government-issued loans. But the vast majority of participants have been homeowners who have made their mortgage payments on time, not the borrowers in crisis who were the targets of the president’s plan, the statistics show.” (See: Federal Mortgage Plan Falls Short, Critics Say)

The foreclosure reduction policy of the Bush Administration is very simple: Make up stuff, repeat it endlessly, endorse voluntary measures that go nowhere and then hope no one will notice the rising number of foreclosures and the ongoing losses on Wall Street.

It’s a plan — but not much of a plan.

This entry was posted on Thursday, May 8th, 2008 at 1:56 am and is filed under , . You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.