FDIC working on plan to guarantee mortgages to stem home foreclosures
Posted by: in HousingFiled under: Forecasts, Housing, Financial Crisis
Most economists concur that keep global financial markets liquid - - and filled with dollars - - is an important part of the effort to end the global financial crisis.
Further, along with the removal of toxic assets from bank and financial institution (FI) balance sheets, stemming the rise in home foreclosures among borrowers capable of servicing their mortgages is another key to ending both the financial crisis and the home foreclosure/asset price decline cycle, many economists agree.
Moreover, it looks like federal officials and banks - - after a slow start - - will launch a new, major program to keep more families in their homes. The federal government might begin guaranteeing home mortgages to persuade lenders to modify home loans, the chairwoman of the Federal Deposit Insurance Corporation stated, Reuters reported Friday.
FDIC Chairwoman Sheila Bair stated that under a program her agency and the U.S. Treasury Department are working on, a bank/lender would be required to significantly drop the interest rate, reduce the principal or extend the life of affected loans, The Washington Post reported Friday. In return, the bank/lender would get a government guarantee that the mortgage would be repaid.
Bair, in testimony before the Senate Banking Committee, could not provide an estimate regarding how much the program would cost, but underscored that the bank rescue program passed by Congress earlier this month give the Treasury power to use loan guarantees and credit enhancements to modify loans to prevent avoidable foreclosures, Reuters reported Friday.
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