Congress should complete action on a Federal Housing Administration modernization bill and leave it to the Bush administration to find ways to help borrowers with “underwater” mortgages, Treasury Secretary Henry Paulson said Wednesday in a major policy speech.
“We do not need a system wide solution for the vast majority of loans where the homeowner has negative equity,” Secretary Paulson told the U.S. Chamber of Commerce. The secretary’s comments show that the Bush administration wants to head off passage of a Democratic proposal that would encourage lenders to write down the principal amount of underwater mortgages so borrowers could refinance into FHA-insured mortgages.
The legislation would authorize $300 billion in FHA loan guarantees. The Bush administration would prefer that the FHA take a more limited approach and use its existing authority to address the problem. “Secretary Alphonso Jackson is examining the potential for FHA to be a solution for those borrowers,” Mr. Paulson said.
The FHA modernization bill, which is stalled in conference, would allow the agency to insure 40-year mortgages, which would stretch out the payments and make them more affordable.
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Tags: FHA, Government Sponsored Enterprise (GSE), Mortgage News
