Government Works to Reduce Foreclosure Rate

[Dec 6, 2007.]

 

Members of Congress are calling for a renewed government effort to reduce the rate of home foreclosures in the country.

The risk of default is increasing, given the fact that some 2 million subprime mortgages will soon reset to higher monthly payments. As House Financial Services Committee Chairman Barney Frank said, "Speed is important. Time is of the essence."

Meanwhile, the head of the Federal Deposit Insurance Corporation has proposed a plan whereby mortgage companies would convert adjustable-rate mortgages to fixed-rate loans for those borrowers who are up to date on their monthly payments.

Treasury Undersecretary Robert K. Steel said the plan is being reviewed at this point. According to Steel, the government and trade groups have expanded toll-free hotlines in order to provide help to homeowners who are in danger of default. In addition, 200,000 letters are being mailed to at-risk homeowners. Steel has said that the Bush Administration is working "flat out" to deal with the housing slump.

"Under the President's leadership, the administration is working diligently to help mitigate the impact of rising foreclosures on homeowners and the economy," Steel said.

Meanwhile, some economists worry that the current housing crisis will lead to an all-out recession. It's been estimated that home loan defaults will increase to at least 2 million in the next 2 years in the subprime loan market. Subprime loans are those home loans that are offered to home buyers with shaky credit histories.
With a change in rates, homeowners with subprime mortgages could see their house payments increase as much as $300 a month.

Meanwhile, Iowa's attorney general has told members of Congress that he's working on an assistance plan for homeowners similar to that used in the '80s to help farmers who were in danger of losing their farms.
It's possible that the housing crisis could emerge as a key issue in the 2008 election.

Julie Ann Amos
December 6th 2007

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