Officials Feud Over Foreclosure Relief for Homeowners

The debate between two federal officials -- Treasury Secretary Henry Paulson and Federal Deposit Insurance Corporation (FDIC) Chairman Sheila Bair -- over whether to use money from the $700 billion bailout fund to help at-risk homeowners avoid foreclosure took center stage when both regulators testified before the House Financial Services Committee today.
Yesterday, ""%{=FONT-STYLE: italic}DSNews.com% reported"":http://www.dsnews.biz/index.php/home/news_story/2184 that the FDIC had revised its national foreclosure prevention proposal, dropping the price tag to $24 billion, from the $40 billion plan put forth by Bair late last month. According to Bair, even with a smaller budget, the FDIC's proposal will prevent foreclosure for 1.5 million homeowners.
However Paulson says he will not pay for Bair's, or any foreclosure assistance program, out of the $700 billion Troubled Asset Relief Program (TARP). He said the best way to turn the corner on the housing contraction and reduce foreclosures was to ""increase access to lower cost mortgage lending"" through recapitalization. Paulson told lawmakers, ""Congress passed legislation to deal with financial instability, and that is what we are doing.""
However, Bair told the House Financial Services Committee, ""The root cause of the current economic crisis [is] the failure to deal effectively with unaffordable loans and unnecessary foreclosures,"" She said that the rescue package penned by Congress gives Paulson the specific authority to use loan guarantees and credit enhancements to foster loan modifications and prevent avoidable foreclosures.
Congressional leaders, such as Rep. Barney Frank (D-Massachusetts) and Rep. Maxine Waters (D-California), have long advocated for Bair to lead a national fight against foreclosure. They have repeatedly praised her for the systematic loan modification program implemented at IndyMac Bank, which has since been used as an industry model for banks' individual home retention initiatives and even the government's GSE loan modification program introduced ""last week"":https://www.dsnews.biz/index.php/home/news_story/2162.
House Financial Services Committee Chairman Frank said again today that he supported Bair's approach, and that he wanted to see some of the $700 billion bailout fund used to help troubled mortgage owners. ""Some of this TARP money has to be used for mortgage foreclosure prevention,"" Frank said.
As ""%{=FONT-STYLE: italic}DSNews.com% reported"":http://www.dsnews.biz/index.php/home/news_story/2184 yesterday, President-elect Barack Obama has said that if there is not a national foreclosure assistance program in place by the time he takes office in January, he will make it one of his top priorities.