WASHINGTON — President George W. Bush announced steps at the national level last week to help keep homeowners in their homes.
"It's not the government's job to bail out speculators, or those who made the decision to buy a home they knew they could never afford. Yet there are many American homeowners who could get through this difficult time with a little flexibility from their lenders, or a little help from their government," he said.
"So I strongly urge lenders to work with homeowners to adjust their mortgages."
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The president first asked Congress to modernize the Federal Housing Admin-
istration to lower downpayment requirements, provide coverage for larger loans, and allow FHA greater pricing flexibility through its new FHA-Secure initiative. He noted that the House passed a similar bill with more than 400 votes but has not acted this year.
He also asked for a temporary change in the tax code to allow borrowers forced to sell their homes for less than they paid for them to avoid paying taxes on the difference if that portion of the loan is forgiven.
Finally, the administration will work with various groups to expand foreclosure counseling and aid refinancing. He also noted that the federal banking agencies are improving disclosure requirements for accuracy and comprehension.
The president added, "This administration will soon issue regulations that require mortgage brokers to fully disclose their fees and closing costs. We're pursuing wrongdoing and fraud in the mortgage industry through the Department of Housing and Urban Development, the Department of Justice, the Federal Trade Commission, and other agencies. In other words, if you've been cheating somebody we're going to find you and hold you to account."
In response, House Financial Services Committee Chairman Barney Frank (D-Mass.) welcomed the administration's recognition that "greater public response is required and I look forward to working with them because I agree with a number of specific things that they propose." He said the House has already sent the GSE bill to the Senate and hopes to send an FHA bill soon.
He still took issue with the president on how to accomplish some of these remedies. "I continue to believe that the portfolios of Fannie Mae and Freddie Mac can play a bigger role than they are currently are playing, particularly in helping the refinancing of subprime mortgages that are about to experience significant interest rate increases," Frank said. "I believe that the Administration's objections to this are not based on safety and soundness grounds, but represent their one remaining ideological refusal to recognize the need for a greater institutional role in this regard.
"Finally, there needs to be a federal role in the construction of new affordable housing and preservation of existing affordable housing."
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