From MarketWatch:
WASHINGTON (MarketWatch) — The White House is proposing to expand the role of the federal government to stem a wave of morgage defaults, President Bush said Friday, unveiling a series of steps including allowing refinancing into government-insured mortgages.
Under the plan, the Federal Housing Administration’s mortgage insurance program will be changed to allow more people to refinance with FHA insurance if they fall behind on adjustable-rate mortgages.
People who have missed mortgage payments are now ineligible for FHA insurance.
The president’s plan would allow them to be eligible for FHA insurance if the amount they are required to pay each month increases, as has happened on many adjustable loans with so-called “teaser” introductory rates.
However, Bush is rejecting a wholesale bailout of borrowers and lenders alike, saying it’s not Washington’s role to provide such a backstop.
“The government’s got a role to play,” Bush said at the White House. “But it is limited.”
David Bach over at Yahoo! Finance recently wrote this about the recent White House announcements concerning the U.S. government’s plan to assist American homeowners with the FHA loan program:
On Aug. 31, while many of us were getting ready for a long holiday weekend, President Bush addressed the nation about the mounting concerns in the housing market. His speech took place exactly one month before we’ll see a record-breaking $50 billion in mortgages reset to a new rate.
That’s right, in the month of October alone, many homeowners will be forced to pay higher monthly mortgage payments than they can reasonably afford. And while this number is staggering, it’s not exactly new information — it’s been known for two years that the crisis was coming.
The Associated Press reports that, in all, 2 million homeowners have adjustable rate mortgages scheduled to reset by the end of 2008. Of those, the Federal Housing Administration (FHA) estimates that 500,000 could experience foreclosure.
Is Bush’s Proposal Enough?…