House Members Pushing for Foreclosures Modification

by Donald Hanz on Foreclosure Help

Chairwoman Sheila Bair of the Federal Deposit Insurance Corporation (FDIC) has previously proposed a program to reduce foreclosure homes but was met with strong opposition from the same administration that appointed her. Bair’s plan intends to use $24 billion from the Troubled Asset Recovery Program (TARP), the $700 billion bailout package approved by Congress, to encourage lenders to restructure mortgages of homeowners in trouble of losing their homes from foreclosures.

The mortgage modification would allow a reduction of the monthly amortizations that homeowners have to pay down to levels commensurate with their income flows. The FDIC has declared that the plan could help 1.5 million homeowners avoid foreclosures in the next year.

The current administration and the Treasury Department has avoided this proposed plan, and instead opted to use $290 billion of the TARP money in putting investments back to banks, while another $40 billion was used to bailout beleaguered insurance giant AIG.

Democrats have criticized the administration of steering away from the original intent of the TARP money which is to purchase troubled properties and avert foreclosures. The administration has argued that this might not be an appropriate use of these funds.

Democratic Members who believe in the effectiveness of Bair’s plan are supporting her in a discussion with Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke during a recent House Financial Services Committee hearing. These Members are optimistic that mobilization of the funds towards foreclosures mitigation would finally start to commence. House Speaker Nancy Pelosi is supportive of the program and believes that finding a resolution to the home foreclosures crisis can also alleviate the overall economic crisis the country is facing.

While the Treasury Department has defended their use of the federal fund for banks and insurance companies, they are still opening doors towards foreclosures mitigation and would be reserving funds for use under the discretion of the incoming President-elect Barack Obama.

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