Transcripts

President Bush Weighs In On The Mortgage Mess

PAUL KANGAS: Shortly after Bernanke's speech, President Bush proposed a series of initiatives to help homeowners who are at risk of defaulting on their mortgages. In a speech from the White House rose garden, the president said his plan is not a bail out, but a helping hand so people can keep their homes. Darren Gersh reports.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: In his first major policy response to the looming foreclosure crisis, the president stressed he is trying to help those who deserve it, not those who caused the problem.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The government has got a role to play, but it is limited. A Federal bailout of lenders would only encourage a recurrence of the problem. 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.

GERSH: The president called on mortgage lenders to show flexibility in working with responsible borrowers and he offered targeted help to homeowners. The administration will soon offer Federal Housing Administration insured loans to borrowers who were making their payments, but fell behind when their mortgages reset to a higher interest rate. The borrowers must have at least 3 percent equity in their house and be able to repay the new mortgage. Mr. Bush also backed legislation already moving through Congress that would lower FHA down payment requirements and increase the FHA borrowing limit to $417,000. Eighty thousand homeowners should be helped by the changes, but Democratic Senator Charles Schumer says more needs to be done, including better consumer education and reforms in the way mortgages are serviced.

SEN. CHARLES SCHUMER (D) NEW YORK: I think the number one problem we face is, when a homeowner is facing foreclosure and the mortgage broker is gone and the mortgage lender is gone and the loan is chopped up into 50 different pieces in the securities market, who is going to help the homeowner with refinancing?

GERSH: The president cautioned the foreclosure crisis would take time to play out. But for now, mortgage consultant Howard Glaser says the administration chose not to address the growing problems outside the sub- prime market.

HOWARD GLASER, PRINCIPAL, GLASER GROUP: By coming out with this plan today, the president puts a marker down. It's insurance against the market turning down further and inoculates him against the criticism that he didn't do anything when it became obvious to the vast majority of observers there were serious problems in the marketplace.

GERSH: The president did back temporary tax relief for homeowners who receive some loan forgiveness from their mortgage lender. Under current law, the amount forgiven is considered taxable income by the IRS. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.