Consumer Law

Frank proposes FHA short refi bill

By Alan White

Congressman Barney Frank, Chair of the House Financial Services Committee, has announced a mortgage rescue plan: a bill to permit FHA to insure refinance mortgages. The discussion draft is available here. FHA would insure new mortgages for up to 90% of the current home value, on condition that the existing mortgage holders agree to write down the existing mortgage debt to that amount. Eligible homeowners would be owner-occupants financially unable to make payments on their current mortgage(s), and may be delinquent on their current mortgage. An intriguing new auction process would allow existing mortgage holders to bid for refinance guarantees for a reduced principal payoff. The bill separately authorizes grants and loans to states for purchasing foreclosed homes, to prop up the housing market and deal with housing abandonment.

While the Bush administration has opposed bailouts, the proposal is conceptually similar to the one being offered by John Reich, director of the Office of Thrift Supervision.

Full post as published by CL&P Blog on March 14, 2008 (boomark / email).