Transcripts

The FDIC's Home Sweet Home Plan

PAUL KANGAS: There's another plan on the table tonight to keep financially strapped Americans in their homes. This new proposal is from the Federal Deposit Insurance Corporation, the FDIC. Tuesday, the Treasury and Federal housing officials unveiled their plan to modify troubled mortgages. But as Stephanie Dhue explains, the FDIC is trying a different tactic, dangling money in front of lenders and hoping they'll bite.

STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Despite the many hopeful sounding offers of help for homeowners to avoid foreclosure, the reality is only about 4 percent of troubled loans are modified each month. Congressman Dennis Kucinich says that's unacceptable.

REP. DENNIS KUCINICH, (D) OHIO: Resolution of the mortgage crisis demands stronger action by the Federal government than private industry so far has been willing to undertake.

DHUE: The FDIC loan modification proposal would reduce monthly payments for struggling borrowers. The government would also pay loan servicers $1,000 for each loan modified and share up to half of the losses if the loan still defaults. And the plan comes with an estimated $24.4 billion price tag. John Courson of the Mortgage Bankers Association says the FDIC plan makes it easier for loans that were bundled and sold to Wall Street to be worked out.

JOHN COURSON, COO, MORTGAGE BANKERS ASSOCIATION: There are some that have a flat restriction. There are some that have a restriction as to how many loans can be modified and that's been one of the frustrations of I think borrowers, I think regulators and I know services of not being able to modify loans that are inside those securities.

DHUE: Just two days ago, Treasury Secretary Henry Paulson dismissed the idea of spending money on loan modifications. But the White House today said it's reviewing the FDIC proposal. Analyst Jaret Seiberg says in the meantime, lenders may be holding out.

JARET SEIBERG, FINANCIAL SERVICES POLICY ANALYST, STANFORD GROUP: The problem with having multiple plans out there is that nobody wants to take advantage of one proposal when they believe a better proposal is coming down the pike.

DHUE: Analysts say this may be the last best offer the industry gets. Some congressional Democrats want to put a moratorium on foreclosures and let bankruptcy judges modify loans, ideas the industry opposes. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.