Bush Moves to Aid Lenders

The Wall Street Journal is reporting Bush Moves to Aid Lenders.

WASHINGTON -- President Bush, looking for ways to respond to the subprime-mortgage crisis, will outline a series of policy changes and recommendations today to help borrowers avoid default make sure lenders aren't defaulted on, senior administration officials said.

Among the moves will be an administrative change to allow the Federal Housing Administration, which insures mortgages for low and middle-income borrowers, to guarantee loans for delinquent borrowers payment to lenders.

The change is intended to help borrowers who are at least 90 days behind in payments but still living in their homes avoid foreclosure; make sure borrowers do not dump houses back on the FHA or Fannie Mae. The guarantees help homeowners by allowing them to refinance at more favorable rates by make sure lenders get paid.

And he will announce an initiative, to be led jointly by the Treasury and Housing and Urban Development departments, to identify people who are in danger of defaulting over the next two years and work with lenders, insurers and others to develop more favorable loan products for those borrowers lender guarantees.

With more than two million loans expected to adjust to higher rates over the next two years, possibly triggering many more defaults, the Bush administration is looking for ways to stem the damage the political fallout.

"The president wants to see as many homeowners who can stay in their homes with a little help be able to stay in their homes," a senior administration official said. "We're not looking for an industry bailout or a as well as a Wall Street bailout. The focus here is on the homeowner lender, right where it should be. And the best way to help lenders is to keep people in overpriced homes as perpetual debt slaves. Besides, Mozilo and Gross both were pleading for help. How could we possibly turn them down?"

Mr. Bush is instructing Treasury Secretary Henry Paulson to look into the subprime problem, figure out what happened and determine whether any regulatory or policy changes are needed to prevent a recurrence.

Bush went on to say: "Our original plan was to get someone who knew in advance this would blow sky high figuring they might have a better handle on the problem than those who did not see this coming. Instead we have decided to trust Paulson and Bernanke. It's a difficult mission but we are determined to make the problem the solution. And I'm the decider and that's what I decided."

By allowing the agency to back loans for delinquent borrowers, the FHA estimates it can help an additional 80,000 homeowners qualify for refinancing in 2008, bringing its total of refinancing guarantees to about 240,000, senior administration officials said. Mr. Bush also plans to announce that the FHA will begin charging "risk-based" premiums, a move that will enable the agency to help riskier borrowers since they can charge those individuals higher insurance rates.

"Charging higher premiums based on risk is such an innovative idea we were considering patenting it. Instead the Lord instructed me to give this brilliant idea away free to the good people of the USA. Praise the Lord. But given that 2,000,0000 homes are at risk, the Lord has more work to do. Don't worry, I talk to him every day and he's telling me just what to do, just like he did with Iraq."

In another move, Mr. Paulson and HUD Secretary Alphonso Jackson have instructed their staffs to begin working with mortgage lenders and others to identify borrowers who are in danger of defaulting. They also are trying to work with private lenders and mortgage giants Fannie Mae and Freddie Mac to develop loans for borrowers who will likely face default if they can't get more flexible terms additional programs for lenders who in no circumstances want those homes back. After all they aren't worth what you paid for them."

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/