President Bush Announces
Private-Sector Plan To Help Struggling Homeowners, Calls On Congress To Join
Administration In Acting
Bush outlined steps the Administration is taking to help American homeowners and
called on Congress to join him in delivering relief to homeowners in need.
In August, President Bush announced measures to
help many struggling homeowners, including directing Treasury Secretary Henry
Paulson and Housing and Urban Development (HUD) Secretary Alphonso Jackson to
work with lenders, loan servicers, mortgage counselors, and investors on an
initiative to help struggling homeowners.
Secretaries Paulson and Jackson responded by
assembling a private-sector group called the HOPE NOW Alliance. HOPE NOW is an
example of government bringing together members of the private sector to
voluntarily address a national challenge – without taxpayer subsidies or
government mandates. Today (12/6/07), the President announced that these efforts
have yielded a promising new source of relief for American homeowners.
announced that representatives of HOPE NOW have developed a plan under which
up to 1.2 million homeowners could be eligible for assistance.
Many individual homeowners feeling financial stress have "adjustable rate
mortgages," which typically start with a lower interest rate and then reset
to a higher rate after a few years. The HOPE NOW plan is designed to help
subprime borrowers who can at least afford the current, starter rate on a
subprime loan, but will not be able to make the higher payments once the
interest rate goes up. HOPE NOW members have agreed on a set of new
industry-wide standards to provide systematic relief to these borrowers in
one of three ways:
Refinancing an existing loan
into a new private mortgage;
Moving them into an
FHASecure loan; or
Freezing their current
interest rates for five years.
President's Announcement In August Of Targeted Actions To Assist Homeowners, The
Administration Has Moved Forward With Three Key Steps
1. The President and
his Administration have launched a new initiative at the Federal Housing
Administration (FHA) called FHASecure.FHASecure expands the FHA's ability to offer refinancing by giving it
the flexibility to work with homeowners who have good credit histories but
cannot afford their current payments. In just three months, the FHA has received
over 120,000 refinancing applications and has already helped more than 35,000
people refinance. By the end of 2008, the FHA expects this program to help more
than 300,000 families.
The FHA is also on
track to start charging mortgage insurance premiums based on the individual
risk of each loan, using traditional underwriting standards.
Risk-based pricing will expand access and enable FHA to help even more
low-to-moderate income families who could not otherwise qualify for
2. Secretaries Paulson
and Jackson have assembled the private-sector HOPE NOW alliance.
This morning, representatives of HOPE NOW briefed the
President on the plan they have developed. In addition:
HOPE NOW recently
mailed hundreds of thousands of letters to borrowers falling behind on their
payments. In the past, some lenders and
mortgage servicers may not have contacted borrowers until after their loans
were delinquent. The Alliance is trying to reach families early, before
their mortgage problem becomes overwhelming.
HOPE NOW has supported a
toll-free hotline, 1-888-995-HOPE,
which is available 24-hours a day to provide mortgage counseling in multiple
3. The Federal
government is taking several regulatory actions to make the mortgage industry
more transparent, reliable, and fair. Later this
month, the Federal Reserve intends to announce stronger lending standards that
will help protect borrowers. In addition, HUD and the Federal banking regulators
are each taking steps to improve disclosure requirements so that homeowners can
be confident they are receiving complete, accurate, and understandable
information about their mortgages.
If Members Of Congress
Are Serious About Responding To The Challenges In The Housing Market, They Can
Start With Several Steps Of Their Own
1. Congress needs to
pass legislation to modernize the FHA. In April
2006, President Bush first sent Congress an FHA modernization bill that would
increase access to FHA-insured loans by lowering downpayment requirements,
allowing the FHA to insure bigger mortgages in high-cost states, and expanding
FHA's authority to price insurance fairly, with risk based premiums. The House
passed the bill with more than 400 votes last year. This year, the House passed
it again, yet the Senate has not acted.
The liquidity and
stability that FHA provides the market are needed now more than ever, and
the President urges the Senate to move as quickly as possible.
This bill could allow the FHA to help 250,000
additional families by the end of 2008.
2. Congress needs to
temporarily reform the tax code to help homeowners refinance during this time of
housing market stress. Under current law, if the
value of your house declines and your bank forgives a portion of your mortgage,
the tax code treats the amount forgiven as taxable income. The House recently
passed this tax relief with bipartisan support, and the Senate should pass
relief as soon as possible.
has also proposed allowing cities and States to issue tax-exempt mortgage
bonds to refinance existing loans, and the President calls on Congress to
approve this temporary measure quickly. Under
current law, cities and states can issue tax-exempt bonds to finance new
mortgages for first-time homebuyers, and this measure would make it easier
for State housing authorities to help troubled borrowers.
3. Congress needs to
pass funding to support mortgage counseling.
Non-profit groups like NeighborWorks provide an essential service by helping
homeowners find affordable mortgage solutions and prevent foreclosures. The
President's FY 2008 Budget requests $120 million for NeighborWorks and another
$50 million for HUD's mortgage counseling program. Congress has had these
requests since early February, and it needs to stop delaying and get this
funding to the President's desk.
4. Congress needs to
pass legislation to reform Government Sponsored Enterprises (GSEs) like Freddie
Mac and Fannie Mae. GSEs provide liquidity to the
mortgage market that benefits millions of homeowners, and it is vital that they
operate safely and soundly. The President has called on Congress to pass
legislation that strengthens independent regulation of the GSEs and ensures they
focus on their important housing mission. The GSE reform bill passed by the
House earlier this year is a good start, and the Senate needs to pass
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