Anti-Foreclosure Plan Stalls in White House

The White House has said it is currently reviewing several foreclosure prevention programs, but reportedly has major drawbacks to the ""national loan modification program"":http://dsnews.comview_story.cfmxid=3070 that Sheila Bair, chairman of the ""Federal Deposit Insurance Corporation"":http://www.fdic.gov (FDIC), has submitted.
According to a report by %{=FONT-STYLE: italic}""Bloomberg News"":http://www.bloomberg.com%, both the White House and Treasury Secretary Henry Paulson want to scale back Bair's proposal. The Bush Administration apparently is reluctant to sign off on the plan, which would use government guarantees as incentives for lenders to modify troubled loans, because of its $50 billion price tag - funding which would come out of the government's $700 billion rescue package.
The government's lack of focus on homeowners losing their share of the American dream to rising foreclosure numbers has drawn outrage from many legislators, particularly Democrats. Adding even more fuel to the fire is the White House's hang-up with $50 billion for direct foreclosure assistance, when it has already doled out $250 billion to bolster banks' bottom lines and bail out Wall Street firms. Bloomberg reports that White House and Treasury officials are concerned the program, intended to help as many asthree million homeowners through $500 billion of mortgage guarantees, would give a windfall to banks that made bad loans.
Senate Banking Committee Chairman ""Christopher Dodd (D-Connecticut)"":http://dodd.senate.gov/index.phpxq=node/4616, joined by other Democrats on his committee sent a ""letter"":http://dodd.senate.gov/index.phpxq=node/4616 to President Bush last Thursday, urging the Administration to address ""the root cause of our nation’s economic problems - the foreclosure crisis."" In the letter, Dodd and his fellow legislators, chastised the Treasury for having yet to announce any efforts dedicated to helping people keep their homes, and demanded the Treasury use its authority ""to act decisively, aggressively, and swiftly to reduce foreclosures."" Because of Bair's and the FDIC's ""demonstrated commitment,"" that agency is best suited to implement the program, the lawmakers wrote.
The White House is said to be spearheading negotiations among federal agencies on the composition of the program, but so far, nothing has been completed or announced. ""The Administration, including the White House offices, HUD, and Treasury, has been looking at ways to reduce foreclosures, and that process is ongoing,"" said Jennifer Zuccarelli, a Treasury spokeswoman in Washington.
As ""%{=FONT-STYLE: italic}DSNews.com% reported"":http://dsnews.comview_story.cfmxid=3070, Bair outlined her government-led, incentive-based loan modification program before Congressional leaders on October 23. In addition to guaranteeing up tothree million at-risk mortgages, the program would also cover second mortgages and home equity lines of credit, so lenders would be protected from these losses and be more willing to participate, a report on %{=FONT-STYLE: italic}""Reuters.com"":http://www.reuters.com% explained. The program would induce lenders to lower monthly mortgage payments through lower principal, term, or interest rate, for a period that would likely be five years, sources familiar with the discussions told %{=FONT-STYLE: italic}Reuters%.