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Morning Bell: This 'Something' Will Not Help Mortgage Mess
Posted By Conn Carroll On March 25, 2008 @ 8:55 am In Ongoing Priorities | Comments Disabled
Sen. Hillary Clinton yesterday threw her weight behind  a plan by Rep. Barney Frank (D-Mass.) and Sen. Chris Dodd (D-Conn.) to authorize the Federal Housing Administration (FHA) spend $20 billion in taxpayer money to guarantee up to $400 billion in questionable mortgages. Considering Sen. Barack Obama is already a co-sponsor  of Dodd’s legislation, and the House has already scheduled hearings on the bill, the plan is likely to become the front line in Congress’ fight to “do something” about the current financial instability.
Under the Frank-Dodd bill, lenders that chose to take part in the new program would agree to reduce loan amounts and refinance mortgages at lower rates in return for a cash fee. The refinanced loans would then be guaranteed by the FHA and the lender would have no further credit exposure if the borrower subsequently defaulted. This means taxpayers would be on the hook for any defaulted loans refinanced through the program. The Frank-Dodd plan is essentially a government buyout disguised as a refinancing plan. Specific problems with the program  include:
Frank-Dodd would set an extremely bad precedent, as lenders will quickly request that similar guarantees be made available to all loans to borrowers with poor credit histories or lower incomes. It would be a step toward government micromanagement of the mortgage market and would also signal that there are no real consequences for poor lending practices.
Article printed from The Foundry: Conservative Policy News Blog from The Heritage Foundation: http://blog.heritage.org
URL to article: http://blog.heritage.org/2008/03/25/morning-bell-this-something-will-not-help-mortgage-mess/
URLs in this post:
 threw her weight behind: http://www.businessweek.com/bwdaily/dnflash/content/mar2008/db20080324_129081.htm?chan=rss_topStories_ssi_5
 already a co-sponsor: http://www.washingtonpost.com/wp-dyn/content/story/2008/03/24/ST2008032403267.html
 Specific problems with the program: http://www.heritage.org/Research/Economy/wm1865.cfm
 Hope Now: http://www.heritage.org/Research/Regulation/wm1742.cfm
 chief scientific adviser: http://www.guardian.co.uk/environment/2008/mar/25/biofuels.energy1
 biologists are challenging earlier claims: http://www.nytimes.com/2008/03/25/science/25frog.html?ref=todayspaper
 WildEarth Guardians: http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2008/03/24/national/a173744D38.DTL
 Liberals from around the world: http://www.csmonitor.com/2008/0325/p20s01-woam.htm
 new study shows: http://www.usatoday.com/news/religion/2008-03-25-kids-spirituality_N.htm
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