MORE FUEL ADDED TO THE FIRE.............. --------------------------------------------------------------
Bush to Expand Government Role to Deal With Subprime (Update1)
Aug. 31 (Bloomberg) -- President George W. Bush today will announce steps the administration says will help people with subprime mortgages keep their homes.
Bush will let the Federal Housing Administration, which insures mortgages for low-and middle-income borrowers, guarantee loans for delinquent borrowers, allowing them to avoid foreclosure and refinance at more favorable rates, according to an administration official.
The change would affect borrowers who are at least 90 days behind in payments and let them continue living in their homes, the official said on condition of anonymity. Bush, in a statement in the White House Rose Garden, also will back proposals to provide tax relief for homeowners who refinance.
Tighter credit and higher borrowing costs threaten the housing market, which has been an engine of U.S. economic growth. Democrats in Congress and the party's presidential candidates have criticized Bush for not taking action to prevent the spread of foreclosures.
The president still opposes Democratic calls to let Fannie Mae and Freddie Mac, the two largest U.S. mortgage finance companies, boost purchases of mortgages as a way to ease lending constraints, White House spokesman Tony Fratto said.
Bush's proposals will address ways ``to prevent these kinds of problems from arising in the future,'' Fratto said.
Asian stocks rose to a three-week high ahead of Bush's announcement.
Home Resales
U.S. home resales fell in July to an annual pace of 5.75 million, the slowest since November 2002, the National Association of Realtors reported on Aug. 27. Sales have declined for five consecutive months.
About 14 percent of banks raised standards for mortgages to their most creditworthy borrowers and 56 percent made it more difficult for people with limited or tainted records to get loans, according to a Federal Reserve survey of senior loan officers in mid-July.
Among the plans Bush will announce is a joint initiative of the Treasury and Housing and Urban Development departments to identify people who are at risk of defaulting on their mortgages, the official said.
Bush wants the government to work with lenders, insurers and others to develop more favorable loan products for those borrowers, the administration official said.
Congressional Plans
Congress also is looking at ways to minimize the fallout from the collapse of the subprime mortgage market, including rising numbers of foreclosures among borrowers with poor credit or high debt. Democratic presidential candidates also are pushing for action to stem the number of foreclosures.
Christopher Dodd of Connecticut, chairman of the Senate Banking Committee, said in an interview with CNBC last week that he plans to move legislation next month that would expand the FHA's role to ``provide additional avenues for people to get cheaper, reasonable, safer credit'' without relying on subprime loans.
Senator Hillary Clinton, a New York Democrat, said this month she planned to introduce legislation that would ban penalties for people who pay off mortgages early and require federal registration of mortgage brokers.
An administration proposal to give low-income homebuyers an alternative to subprime loans last month was greeted skeptically by Republican senators and congressional auditors, who said it might be too risky.
The FHA's plan to lower down payments and boost loan limits in its lending program doesn't include a pilot project or consider the impact on African-Americans, Senator Elizabeth Dole, a North Carolina Republican, told the Senate Banking Committee last month.
Risks
The FHA is trying to steer borrowers away from subprime mortgages that often carry higher fees and interest rates. The administration plan would also give the government flexibility to charge different premiums based on buyers' risk.
Bush is holding to his position outlined earlier this month that Congress should first strengthen oversight of Fannie Mae and Freddie Mac before letting the government- sponsored enterprises exceed their current regulatory limits on mortgage holdings.
Fannie Mae and Freddie Mac have said they can help market liquidity by being allowed to buy more of the mortgages and mortgage bonds shunned by investors.
THE ABOVE STATEMENT RELEASED TODAY EXPLAINS TO THE POSITIVE DAYS SENTIMENT.
Within No Time SUBPRIME Will Just be Another Memory, Just As Sept.11 Is Today, "HISTORY".
NOW PREPARE ONES SELF FOR THE NEXT BULL RUN Sept 2007- Jan 2008 (No.1 PERFORMING SECTOR WILL BE ENERGY)
Cheers:)
ASX Price at posting:
0.0¢ Sentiment: LT Buy Disclosure: Held
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