Bush To Outline Aid To Mortgage Holders

Offering federal aid for strapped mortgage holders, the White House outlined proposals today to help borrowers hard hit by credit problems and the housing slump. It was the Bush administration's first efforts to deal with an expected wave of mortgage defaults fueled by the subprime-mortgage crisis.

White House press secretary Tony Snow said he could not provide an estimate of how much the proposals would cost taxpayers or what affect they would have on the housing market. He bristled at questions about why the measures had not been taken sooner. "I'm sure we'll have plenty of time for backseat driving," Mr. Snow said. The White House said the plan was not a bailout for lenders or speculators.

One of the key elements of President George W. Bush's plan would allow homeowners with a good credit history, but who cannot afford their mortgage payments, to refinance into mortgages insured by the Federal Housing Administration to keep from defaulting. However, he rejected any direct government aid to homeowners losing their houses to foreclosures, saying he only supported federal government help that would encourage refinancing and educate prospective home buyers about risky mortgage terms. Today, the conservative Republican president planned to urge Congress to pass legislation that would give the Federal Housing Administration more flexibility in assisting mortgage holders with subprime mortgages; pledge to work with Congress to reform the tax code to help troubled borrowers rework their loans; call for rigorously enforcing "predatory lending" laws and strengthening lending practices.

Foreclosure and late payments have spiked, especially for so-called subprime borrowers with blemished credit histories or low incomes. Higher interest rates and weak home values have made it impossible for some to pay or to keep up with their monthly mortgage payments. Some overstretched homeowners can't afford to refinance or even sell their homes. Mortgage foreclosures and late payments are expected to worsen. Some 2 million adjustable rate mortgages are to reset to higher rates this year and next. Steep penalties for prepaying mortgages have added to some homeowners' headaches.

My response: This is a bailout. The government is only encouraging risky behavior in the future - as it has done in the past - with this move. Mortgage lenders loaned to risky buyers (who knew they were risky prospects), so it is these two entitities - and not taxpayers - who should shoulder the burden. Question: if the homeowners who President Bush wishes to target truly already have good credit histories, why can't they refinance on their own - as others do - without government help? Why were they in an ARM - i.e., a risky mortgage - in the first place? I don't own a home yet, but no way would I enter a contract where there is a penalty if I prepay on my mortgage so I can pay it off faster.