By SPA
Washington : The Bush administration is expanding a government program to help homeowners who have seen house values decline and are facing foreclosure, a senior official said as the administration moves to counter Democratic calls for a broader federal housing rescue.
Federal Housing Administration (FHA) chief Brian Montgomery told lawmakers that his program would encourage lenders to erase some of a failing loan amount in order to receive a government guarantee of timely payments. The plan is designed to help more low- to moderate-income homeowners refinance into mortgages with monthly payments they can afford, while lenders would take a loss on the loans.
“We will permit and encourage lenders to voluntarily write down outstanding principal,” Montgomery told the House of Representatives Financial Services Committee. He emphasized that he wanted to preserve the self-funding structure of FHA and not make taxpayers responsible for failing loans. Unlike a proposal by Democratic lawmakers, the plan outlined by Montgomery would not require a big cash infusion to get started.
“This new administrative change will ensure the integrity of the FHA insurance fund over the long term, protect the taxpayer, and guarantee that FHA will be around to help struggling homeowners in the future,” Montgomery said.