Bush addresses subprime crisis

From the Wall Street Journal:

Bush Moves to Aid Homeowners
August 31, 2007; Page A4

President Bush, looking for ways to respond to the subprime-mortgage crisis, will outline a series of policy changes and recommendations today to help borrowers avoid default, senior administration officials said.

Among the moves will be an administrative change to allow the Federal Housing Administration, which insures mortgages for low- and middle-income borrowers, to guarantee loans for delinquent borrowers. The change is intended to help borrowers who are at least 90 days behind in payments but still living in their homes avoid foreclosure; the guarantees help homeowners by allowing them to refinance at more favorable rates.

Mr. Bush also will ask Congress to suspend, for a limited period, an Internal Revenue Service provision that penalizes borrowers who refinance the terms of their mortgage to reduce the size of the loan or who lose their homes to foreclosure. And he will announce an initiative, to be led jointly by the Treasury and Housing and Urban Development departments, to identify people who are in danger of defaulting over the next two years and work with lenders, insurers and others to develop more favorable loan products for those borrowers.

The moves are the first visible steps the Bush administration has taken to help stem the fallout from the subprime crisis, which has roiled financial markets and threatened to contaminate the housing sector. Defaults and foreclosures are increasing as borrowers — many of whom got interest-only or no-money-down loans — begin having trouble making their mortgage payments as higher rates kick in. Many homeowners believed they could refinance their loans, but that has become much harder as lenders tighten their standards in the face of defaults and foreclosures.

With more than two million loans expected to adjust to higher rates over the next two years, possibly triggering many more defaults, the Bush administration is looking for ways to stem the damage.

“The president wants to see as many homeowners who can stay in their homes with a little help be able to stay in their homes,” a senior administration official said. “We’re not looking for an industry bailout or a Wall Street bailout. The focus here is on the homeowner.”

Mr. Bush is instructing Treasury Secretary Henry Paulson to look into the subprime problem, figure out what happened and determine whether any regulatory or policy changes are needed to prevent a recurrence.

For now, the administration’s primary vehicle to help homeowners will be the FHA, which doesn’t originate loans but helps riskier borrowers qualify by guaranteeing their loans against default. By allowing the agency to back loans for delinquent borrowers, the FHA estimates it can help an additional 80,000 homeowners qualify for refinancing in 2008, bringing its total of refinancing guarantees to about 240,000, senior administration officials said. Mr. Bush also plans to announce that the FHA will begin charging “risk-based” premiums, a move that will enable the agency to help riskier borrowers since they can charge those individuals higher insurance rates. Right now, FHA premiums are a flat 1.5% of the loan, and the change would give the FHA flexibility to charge some borrowers as much as 2.2%.

Still, the move will help only a small portion of homeowners — and few in high-cost states such as California or New York — because the FHA faces constraints on the size of the loans it can back and strict rules that borrowers must meet. The Bush administration has been pushing Congress to enact overhauls that would eliminate the required 3% down payment and raise the size of the loans the FHA can insure to as much as $417,000 from $362,790. Senate Banking Committee Chairman Christopher Dodd (D., Conn.) said recently that FHA reform will be among his priorities when Congress returns from its August recess, and a bill is expected to head to the full House this fall.

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46 Responses to Bush addresses subprime crisis

  1. sas says:

    This is BS.


  2. pablo says:

    let’s hope that this move is as ineffectual as everything else this president has tried to do

  3. PO'ed says:

    can someone please repost link to petition
    agaist any bailout.

  4. HEHEHE says:

    If it is as successful as the state programs have been then don’t expect much

  5. BC Bob says:

    Any truth to the rumor that the news conference will be held in New Orleans?

  6. x-underwriter says:

    Bottom line, FHA will not lend for over the appraised value. Most places that are in trouble will no longer appraise for what they need to to refi the loan.

  7. Cultural Infidel says:

    If the IRS will not be taxing forgiven debt for these people then they should extend tax breaks to the rest of us…my downpayment fund could always use some extra cash.

  8. chicagofinance says:

    Another fiat du jour from this tone deaf joker.

  9. chicagofinance says:

    The only recent President we’ve had that treats his position as a part time job or else a hobby.

  10. Mike says:

    This will help very few in the NE. FHA limits are $363K. They will try to raise it to $417k. This will not help the over $500k group.

    Also, FHA has strict LTV standards and documentation standards.

  11. versity says:

    Agreed that this will help very few in the coasts’ expensive markets.

    At least we know that with this administration the program will be well-designed and competently and efficiently run.

  12. James Bednar says:

    FHA has strict standards for income verification. No liar loans here.


  13. PeaceNow says:

    W. learned how to treat this job as a hobby from his father.

    This plan is just the Republicans way of trying to keep some kind of support from the middle- and lower-middle class before the next election. Just like those tax cuts.

  14. njpatient says:

    Bush. Idiot. But I repeat myself.

  15. pesche says:


    they love it

  16. Salty Dog says:

    [“We’re not looking for an industry bailout or a Wall Street bailout. The focus here is on the homeowner.”]

    Whatever they say, the opposite is always true.

  17. t c m says:

    do you think it will cover people who had sane mortgages, and then re-financed to buy things?

  18. t c m says:

    or investors – will it cover them also?

  19. James Bednar says:

    If you bail out the homeowner by refinancing them into a new loan, you are also bailing out investors and the lenders.

    It is that simple.


  20. t c m says:

    i didn’tn mean investors in the securities, i meant people who bought houses as an investment. do you think these people, as well as those who refinanced out of something sane, into a larger riskier loan, will be eligible for a new loan under this program.

  21. t c m says:

    or the people who lied on their application?

  22. Bubble Disciple says:

    Which online bank is the one that lets you maintain deposits in foreign currencies.

  23. Bubble Disciple says:

    I think with policies like this, the dollar is going to continue to slide. I just wonder if the Europeans will start doing the same thing with their real estate market.

  24. James Bednar says:

    No way that any kind of bailout would include NOO (Non-owner occupied) housing.


  25. Bubble Disciple says:

    I agree – no direct effect on NOO housing.
    But even they will benefit somewhat by general increase in availability of credit

  26. Orion says:

    Seems to me this plan is just delaying the inevitable, into the holiday season.

  27. Orion says:

    And, in the meantime, allows troubled homeowners into a false sense of security. But it does help the economy, as these folks keep on spending into the holidays. And, if trouble lurks again, another gov’t intervention will save the day.

  28. Jay says:

    #22 Everbank offers CDs in various currencies.

  29. Clotpoll says:

    What a pandering load of eyewash.

  30. sas says:

    WTF? Mr. Bush has totally lost it??

    “It’s not the government’s job to bail out speculators or those who made the decision to buy a home they knew they could never afford,” Bush said in the Rose Garden. “Yet there are many American homeowners who could get through this difficult time with a little flexibility from their lenders or a little help from their government.”


  31. sas says:

    Here is a link:http://patrick.net/housing/contrib/nobailout.html

    at the bottom, they have a generic letter that you can cut and paste and send to your local senators.


  32. Bruce says:

    Everybody who signed on the dotted line for one of those ridiculous mortgages knew what they were doing. If they didn’t ask the right questions or read the fine print, it’s their fault. Why should the government (i.e., the rest of us) bail them out?

  33. Jamey says:

    Bush is a fu**ing idiot. I just thank God that he’s so politically inept–eg Harriet Miers, Alberto Gonzales. Otherwise, he might have screwed up this country even worse.

    ps: Bush voters? Idiots. That is all.

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