ROBERT SIEGEL, host:
From NPR News this ALL THINGS CONSIDERED. I'm Robert Siegel.
MELISSA BLOCK, host:
And I'm Melissa Block.
We have heard about the fallout for months - defaults, foreclosures, hedge funds in trouble, volatility in the stock market, and mortgage companies close to bankruptcy.
Today, President Bush announced his administrations first major step to address the subprime lending crisis. Economists estimate that more than two million people could lose their homes as their interest rates rise and the value of their property stops rising or even falls. Democrats have criticized the president as being slow to act.
Well, today, Mr. Bush promised some help as NPR's Chris Arnold reports.
CHRIS ARNOLD: The president started his rose garden speech on a glass-half-full note saying that changes in the mortgage industry in recent years created a record level of homeownership, but…
President GEORGE W. BUSH: Unfortunately there's also been some excesses in the lending industry. One of the most troubling developments has been the increase in adjustable rate mortgages. That started out with a very low interest rate and then reset to a higher rate after a few years.
ARNOLD: Many of these exotic adjustable loans are right now going up to the roof to 10, 11 percent, or higher, and adding many hundreds of dollars to borrowers' monthly payments. President Bush.
Pres. BUSH: This has led some homeowners to take that loans larger than they could afford based on overly optimistic assumptions about the future performance of the housing market. Others may have been confused by the terms of their loan or misled by irresponsible lenders.
ARNOLD: The president says he doesn't want to bail out homebuyers or lenders who are reckless, but he says he wants to help responsible homeowners who got stuck. One measure that goes into effect right away uses the Federal Housing Administration to help people refinance into loans with better terms. Most lenders won't offer new loans to borrowers who've gotten behind after their loans adjusted higher, but if the FHA insures a new loan, the borrower can refinance. Another measure that needs Congressional approval would waive a tax that homeowners pay if a lender forgives part of their loan.
Mr. MIKE CALHOUN (President, The Center for Responsible Lending): The proposals are helpful.
ARNOLD: Mike Calhoun is the president of The Center for Responsible Lending, a non-profit, non-partisan research group. The FHA estimates that the Bush proposal would help an additional 80,000 homeowners to refinance. Calhoun says that might sound like a lot…
Mr. CALHOUN: Even the administration acknowledges it so that the several million homeowners face large payments shocks in the threat of foreclosure in the upcoming year, so we need to increase the order of magnetism of this response by at least 10 or 20-fold.
ARNOLD: Calhoun says the real hope for the bulk of the homeowners in trouble is for the lenders and servicing companies to renegotiate the loans to make them more affordable. President Bush.
Pres. BUSH: I strongly urge lenders to work with homeowners to adjust their mortgages. I believe lenders have a responsibility to help these good people to renegotiate so they can stay in their home.
ARNOLD: But housing advocates say such statements alone don't have a lot of teeth, and they say that the president and others in Washington need to do more than just ask lenders to work with homeowners. Bruce Marks heads up the Neighborhood Assistance Corporation of America. The group is working with borrowers who Marks says are stuck in unfair loan.
Mr. BRUCE MARKS (Chief Executive Officer, Neighborhood Assistance Corporation of America): We have submitted, literally, over a thousand submissions to the various lenders to get them to restructure the loans and they're not doing it. Right now, the lenders are only giving lip service, and the president and Congress are letting them off the hook.
ARNOLD: Much of what the president put forth today has already been proposed in the House and the Senate. And housing advocates say much stronger measures are emerging in Congress, some would make it harder for lenders to foreclose without first working in good faith with borrowers.
Chris Arnold, NPR News.
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