Democratic Lawmakers Align on Plan to Insure Mortgages

Wall Street Journal (03/14/08) P. A14; Paletta, Damian; McKinnon, John D.
House Financial Services Committee Chairman Barney Frank, D-Mass., and Senate Banking Committee Chairman Christopher Dodd, D-Conn., have come together on a plan that aims to minimize foreclosures by allowing the FHA to insure up to $400 billion in refinanced mortgages. Before the problem loans could be refinanced, lenders would have to write down some of the principal voluntarily, with the lawmakers insisting that losses from the write-downs would be much lower than losses tied to foreclosures. However, observers say the plan would need Republican backing before it would receive Senate approval. Meanwhile, the Bush administration appears to be considering a more aggressive solution to the mortgage crisis, with one proposal involving government loans that would shave 20 percent off the original mortgage's interest and principal, reduce the interest rate and extend the loan term.