President Bush announces proposals to stem foreclosure effects

Over the past month, the mortgage crisis has received a lot of attention in the popular news channels.

President Bush unveiled Friday, August 31, proposals to deal with an alarming rise in mortgage defaults:

1) Modernize the Federal Housing Administration. The President sent Congress legislation that would help more Americans qualify for FHA loans by lowering down-payment requirements, increasing loan limits, and providing more flexibility in pricing.

2) He is working on a bill in Congress to protect homeowners from having to pay taxes on cancelled mortgage debt during a short sale.

3) FHA-Secure initiative. This initiative will help some people who have good credit but have recently been missing their payments. FHASecure will help these families refinance their mortgages so they can make their payments and keep their homes.

The President stated in his Saturday, September 1st, radio address, “the Federal government is working to make the mortgage industry more transparent and more reliable and more fair, so we can reduce the likelihood that homeowners will face similar problems in the future. Federal banking regulators are strengthening lending standards and making mortgages easier to understand. My Administration is working on new rules to help our consumers compare and shop for loans that meet their budgets and needs. We are committed to pursuing fraud and wrongdoing in the mortgage industry.”

More details on the proposals can be found at the White House website: http://www.whitehouse.gov/news/releases/2007/08/20070831-4.html

The general consensus is that these proposals are modest. John M. Robbins, chairman of the Mortgage Bankers Association (MBA), released a statement that said, "Many of the proposals President Bush rolled out today are ones for which we have long advocated, even before the recent troubles in the subprime mortgage market."

Congresswoman Maxine Waters (D-CA) stated Friday that although she is pleased the President has made such statement on the crisis, he “didn’t come up with anything new.” The initiative to modernize the Federal Housing Administration is outline in her bill, H.R. 1852, which she states will be taken up in Congress during the 2nd week of September and she expects it to pass with support from both sides of the aisle.

According to Dean Baker, an economist and co-director of the Center for Economic and Policy, many of the Bush initiatives would leave unaffected many of those homeowners in the most serious trouble.

The suspension of tax liabilities would not mean much to low-income foreclosure victims, who don't pay much tax anyway. It could, on the other hand, help wealthier real estate investors who speculated on real estate during the boom.

"I don't see any reason at all to give those people a break," said Baker.