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ALEX CHADWICK, host:

This is DAY TO DAY. I'm Alex Chadwick.

ALEX COHEN, host:

And I'm Alex Cohen.

This morning, President Bush announced a list of reforms to help struggling subprime mortgage borrowers to avoid default in paying back their home loans. The president was quite insistent, however, that this is not a rescue mission.

President GEORGE W. BUSH: A federal bailout of lenders would only encourage a recurrence of the problem. It's not the government's job to bail out speculators, or those who made the decision to buy a home they knew they could never afford.

COHEN: With us now is Michael Santoli, an associate editor for Barron's magazine. He writes their Streetwise column. Welcome to the program.

Mr. MICHAEL SANTOLI (Barron's): Thanks very much.

COHEN: So can you give us a quick recap of what the president's plan is that he announced today?

Mr. SANTOLI: Sure. The president essentially said that the federal government will try and help borrowers who may not be able to make their new higher mortgage payments to refinance their mortgages through the Federal Housing Administration; also there's some tax reform measures that will hopefully let people avoid having to pay taxes on the amounts of mortgages that might be forgiven. Those are the two major measures that the president was outlining this morning.

COHEN: Today the president spoke about revising and modernizing the Federal Housing Administration, or FHA. Should that have happened a long time ago, and could we have avoided a lot of this current mess?

Mr. SANTOLI: Well, arguably, yes, that perhaps should have happened a long time ago. And we could have avoided it, although I don't know that that would have been the measure that would have helped us avoid it.

I mean basically, a lot of the aggressive lending practices were coming from the non-bank lenders. Basically, these lesser-regulated entities, mortgage brokers promoting, you know, different and exotic types of mortgages. So that was the part of the industry that people had sort of let go, sort of unrestrained for a long period of time.

I will say that this country has a habit, when we have any kind of an economic or financial boom, of letting the excesses build up and then trying to take care of it after the fact. That has been the tendency throughout history.

COHEN: How helpful will these proposals be to loan holders? Will it be enough to turn things around for the current housing slump?

Mr. SANTOLI: I wouldn't say necessarily turn things around. I think this is a measure to try to contain the damage and perhaps let the housing market stabilize over time. We still have a record amount of unsold homes in inventory that are for sale at this point, something like 10 months' worth right now. So that's something that just has to be digested by the market.

What it will do is, I think, it's going to keep the doomsday scenario from happening, which was all of these mortgages, you know, reset to higher rates and some two million new additional borrowers go into foreclosure. That was some of the estimates we're saying. That would be a true economic disaster and certainly would raise the risks of recession.

So I do think this is a matter of, you know, trying to keep the damage to where it's been right now. I don't think it's going to do much to increase demand for housing.

COHEN: This situation with foreclosures has been going on for quite some time. What about the folks who've already had their house foreclosed upon? Is there - are they just kind of out of luck with the timing of all of this?

Mr. SANTOLI: Seemingly out of luck, yes. You know, as I say, this isn't - in fact, the president was pretty clear in saying that, you know, he didn't wish to allow people who just intentionally got in over their head with too big a mortgage and too expensive a home to necessarily bail them out. A lot of the adjustable rate mortgages were perhaps not fully understood by the borrowers, you can never know that. But yes, you're absolutely right. I mean, it's a bad luck of timing for some people who've already gone through this process.

COHEN: Michael Santoli, associate editor for Barron's magazine. Thank you so much.

Mr. SANTOLI: My pleasure. Thanks.

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