For Sale By Bank
Thursday, October 30, 2008SUSIE GHARIB: Key to stabilizing home prices is slowing the tide of foreclosures. So far, despite several optimistic mortgage rescue programs with names like Hope Now, FHA Secure and Hope for Homeowners, foreclosures continue to rise. By the end of the year, over a third of all homes for sale will likely be bank owned. As Stephanie Dhue reports, the government is now considering a comprehensive plan to help struggling homeowners.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Four million Americans are behind on their monthly mortgage payments. With banks getting government bailouts, pressure is building for more help for homeowners. White House spokesperson Dana Perino says more may be coming, but the details still have to be worked out.
DANA PERINO, WHITE HOUSE SPOKESPERSON: We're doing a lot of analysis right now on several different ideas, thinking about the efficiency issues, how effective it could be, the fairness issues, how would you protect taxpayers and by fairness, I also include in that who would qualify and how would you design it.
DHUE: Sources say the plan could cover as many as three million homeowners at risk of foreclosure, at a cost of $40-$50 billion. It would work like this: lenders would reduce the mortgage amount owed or cut the interest rate so a borrower could afford the monthly payment for five years. In return the government would guarantee half of the lender's losses in the event the modified loan later goes bad. Scott Talbott of the Financial Services Roundtable says the challenge is to protect struggling homeowners without breaking the bank.
SCOTT TALBOTT, SR. VP GOVERNMENT AFFAIRS, FINANCIAL SERVICES ROUNDTABLE: The financial services industry may not be able to continue to lend as well to other sectors of the economy. Remember we're only talking about a small sector of the economy here, a small sector of the homeowners that we're working to save. The rest of Americans are paying their mortgage on time.
DHUE: So far, voluntary plans, like Hope Now and Hope for Homeowners have had limited success. In the last year, foreclosures have outpaced loan modifications four to one. Eric Halperin of the Center for Responsible Lending says the new plan may not go far enough.
ERIC HALPERIN, DIRECTOR, CENTER FOR RESPONSIBLE LENDING: So with this new modification system hopefully that gap will close, but until you can compel lenders to come to the table and provide modifications to the homeowners who qualify and deserve them, we're not going to see numbers of foreclosures reduced significantly.
DHUE: The Neighborhood Assistance Corporation of America is also concerned. NACA's Bruce Marks wants the government to first work out the troubled loans held by Fannie Mae and Freddie Mac.
BRUCE MARKS, FOUNDER & CEO, NEIGHBORHOOD ASSISTANCE CORP. OF AMERICA: That will set the standard for every servicer and lender in this country without one dollar of taxpayer money.
DHUE: Lawmakers may consider more housing proposals as part of a second stimulus package but whatever aid may come will have to wait until after Tuesday's election. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
