FDIC Unveils Plan to Prevent 1.5 Million Foreclosures

[cr]

Why is the FDIC – a depository insurance arm of the Government – so concerned about staving off foreclosure? Why don’t they worry about staying solvent?

Reuters | 14 Nov 2008 | 12:56 PM ET
The Federal Deposit Insurance Corp Friday unveiled a plan to prevent about 1.5 million foreclosures by promising to share any losses with mortgage companies that agree to refinance certain home loans.

The plan would cost the government about $24.4 billion, which could be paid from the U.S. Treasury Department’s $700 billion bailout program, the FDIC said.

So far, most of the money in that program has been injected as capital into banks.

FDIC Chairman Sheila Bair, who spent weeks unsuccessfully lobbying Bush administration officials for the plan, issued the proposal two days after Treasury Secretary Henry Paulson dismissed the idea of the U.S. government underwriting failing home loans.

“That is a subsidy or spending program. The TARP was investment, not spending,” Paulson told reporters on Wednesday, referring to the Troubled Asset Relief Program administered by his department.

The FDIC pushed forward with its plan, posting it on the agency’s Web site on Friday morning.

“Although foreclosures are costly to lenders, borrowers and communities, the pace of loan modifications continues to be extremely slow,” the FDIC said. “It is imperative to provide incentives to achieve a sufficient scale in loan modifications to stem the reductions in housing prices and rising foreclosures.”

The FDIC, which insures most U.S. bank deposits, said its plan would modify about 2.2 million mortgage loans by offering financial incentives to mortgage servicers.

It would pay servicers $1,000 to cover expenses for each loan modified to the required standards, and would promise to share up to 50 percent of losses incurred if a modified loan redefaults.

Eligible borrowers would include those who have missed at least two monthly payments on loans for homes they live in.

Servicers would be expected to lower those borrowers’ monthly payments to about 31 percent of the borrowers’ monthly income.

The Treasury Department said Friday that it was “aggressively” looking at ways to reduce skyrocketing home foreclosures under the TARP.

“We continue to aggressively examine strategies to mitigate foreclosures and maximize loan modifications, which are a key part of working through the necessary housing correction and maintaining the strength of our communities,” Treasury Interim Assistant Secretary Neel Kashkari said in testimony prepared for delivery to a U.S. House of Representatives committee.

Copyright 2008 Reuters. Click for restrictions.
URL: http://www.cnbc.com/id/27718925/

[XBoxBoy]

[quote=cooprider]Why is the FDIC – a depository insurance arm of the Government – so concerned about staving off foreclosure?[/quote]

Because Sheila Bair is a clueless socialist? (or maybe because socialism is the new answer to the worlds problems?)

[XBoxBoy]

[quote=cooprider]Why is the FDIC – a depository insurance arm of the Government – so concerned about staving off foreclosure?[/quote]

Because Sheila Bair is a clueless socialist? (or maybe because socialism is the new answer to the worlds problems?)

[XBoxBoy]

[quote=cooprider]Why is the FDIC – a depository insurance arm of the Government – so concerned about staving off foreclosure?[/quote]

Because Sheila Bair is a clueless socialist? (or maybe because socialism is the new answer to the worlds problems?)

[XBoxBoy]

[quote=cooprider]Why is the FDIC – a depository insurance arm of the Government – so concerned about staving off foreclosure?[/quote]

Because Sheila Bair is a clueless socialist? (or maybe because socialism is the new answer to the worlds problems?)

[XBoxBoy]

[quote=cooprider]Why is the FDIC – a depository insurance arm of the Government – so concerned about staving off foreclosure?[/quote]

Because Sheila Bair is a clueless socialist? (or maybe because socialism is the new answer to the worlds problems?)

[ibjames]

so.. you miss 2 payments.. your payment is lowered.. it doesn’t cover hardly any principal.. or maybe it doesn’t hit principle at all..

how does it work?

[ibjames]

so.. you miss 2 payments.. your payment is lowered.. it doesn’t cover hardly any principal.. or maybe it doesn’t hit principle at all..

how does it work?

[ibjames]

so.. you miss 2 payments.. your payment is lowered.. it doesn’t cover hardly any principal.. or maybe it doesn’t hit principle at all..

how does it work?

[ibjames]

so.. you miss 2 payments.. your payment is lowered.. it doesn’t cover hardly any principal.. or maybe it doesn’t hit principle at all..

how does it work?

[ibjames]

so.. you miss 2 payments.. your payment is lowered.. it doesn’t cover hardly any principal.. or maybe it doesn’t hit principle at all..

how does it work?

[cr]

Maybe it doesn’t work at all, but regardless of our socialist Gov’t that doesn’t answer why they would do this? She’s not elected is she?

Then there’s this:
Servicers would be expected to lower those borrowers’ monthly payments to about 31 percent of the borrowers’ monthly income.

I’m not the first to say we are now encouraging people to lie about how little they make.

Why don’t they give new loans under these terms?

[cr]

Maybe it doesn’t work at all, but regardless of our socialist Gov’t that doesn’t answer why they would do this? She’s not elected is she?

Then there’s this:
Servicers would be expected to lower those borrowers’ monthly payments to about 31 percent of the borrowers’ monthly income.

I’m not the first to say we are now encouraging people to lie about how little they make.

Why don’t they give new loans under these terms?

[cr]

Maybe it doesn’t work at all, but regardless of our socialist Gov’t that doesn’t answer why they would do this? She’s not elected is she?

Then there’s this:
Servicers would be expected to lower those borrowers’ monthly payments to about 31 percent of the borrowers’ monthly income.

I’m not the first to say we are now encouraging people to lie about how little they make.

Why don’t they give new loans under these terms?

[cr]

Maybe it doesn’t work at all, but regardless of our socialist Gov’t that doesn’t answer why they would do this? She’s not elected is she?

Then there’s this:
Servicers would be expected to lower those borrowers’ monthly payments to about 31 percent of the borrowers’ monthly income.

I’m not the first to say we are now encouraging people to lie about how little they make.

Why don’t they give new loans under these terms?

[Author]

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