Bush plans steps to aid borrowers in trouble

August 31, 2007|By New York Times News Service

WASHINGTON -- President Bush, in his first response to families hit by the subprime mortgage crisis, plans to announce several steps today to help Americans who have credit problems to meet the rising cost of their housing loans, administration officials said yesterday.

The officials said Bush would call on the Federal Housing Administration to raise the ceilings on what it can charge for federal mortgage insurance, a move that they said would let an additional 80,000 homeowners with spotty credit records sign up, beyond the 160,000 likely to use it this year and next.

Several other steps the administration plans to announce involve seeking legislative changes and what one official called jawboning of banks and other lending institutions, to persuade them not to foreclose on some borrowers.

Bush, for example, is expected to endorse proposals backed by Democrats in Congress that would raise the ceiling on the amount of a mortgage that can be refinanced with federal insurance.

He is also expected to support legislation that would provide tax breaks to homeowners whose mortgage debt is forgiven, in whole or in part, by lenders. Now, the federal government collects taxes on the amount of a loan that is forgiven.

Administration officials, who asked not to be identified, briefed a handful of news organizations on the proposals to be announced by Bush, apparently to generate attention for these steps at a time of rising criticism by Democrats and to demonstrate concern for Americans anxious over making housing payments.

Democratic presidential candidates and congressional leaders have hammered the administration in recent weeks, charging Bush with indifference to the plight of an estimated 2 million homeowners whose mortgage costs are expected to go up in the next year and a half.

These 2 million mortgages, all held by homeowners with credit problems and for homes that are declining in value, are valued at $500 billion to $600 billion, administration officials said. The total value of American mortgages is about $10 trillion.

Many of these homeowners are lower-income families caught in the squeeze of variable-rate mortgages whose cost will spike in coming weeks and months as the value of the homes declines.

Many are considered likely to default, possibly adding to the global turmoil in the financial markets.

The administration officials who briefed reporters sought to underscore Bush's willingness to work with Democrats on the housing crisis facing many Americans.

It was an unusual display of bipartisanship from an administration that has tangled with Democrats on many economic and budget issues.

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