Financial Times (04/30/08); Guha, Krishna; Politi, James
Federal Deposit Insurance Corp. Chairman Sheila Bair believes borrowers having a tough time making their mortgage payments should be offered government loans for up to 20 percent of their loan amounts in order to pay down their existing mortgages. Borrowers would not be charged interest for the first five years, and lenders would be required to take borrowers' incomes into account and lower payments on existing mortgages accordingly. Lenders also would be charged fees to fund the loan program. Bair believes her proposal augments plans introduced by Rep. Barney Frank, D-Mass., and Sen. Chris Dodd, D-Conn., to get lenders to write down mortgages to account for home price declines so that borrowers can refinance into FHA loans. However, she notes that the $300 billion to $400 billion FHA plan focuses on borrowers who owe much more than their homes are worth; while her plan concentrates on borrowers with unaffordable monthly payments. "Voluntary loan modifications have helped but it is not enough," Bair insists.
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