Rep. Frank: Use $300 Billion to Fight Foreclosures More help could be on the way for people struggling to pay off their home loans. Rep. Barney Frank of Massachusetts wants the federal government to refinance up to $300 billion worth of troubled mortgages.
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Rep. Frank: Use $300 Billion to Fight Foreclosures

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Rep. Frank: Use $300 Billion to Fight Foreclosures

Rep. Frank: Use $300 Billion to Fight Foreclosures

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RENEE MONTAGNE, host:

NPR's business news starts with yet another fix for the housing crisis.

(Soundbite of music)

MONTAGNE: Foreclosure levels are not only at record levels but also rising. A top lawmaker has a plan that would have the government finance up to $300 billion worth of troubled mortgages. NPR's Chris Arnold reports.

CHRIS ARNOLD: Congressman Barney Frank estimates the new effort could help upwards of a million and a half homeowners. That would be far more people than any of the existing relief efforts have reached.

Representative BARNEY FRANK (Democrat, Massachusetts): We need to reduce the amount of foreclosures, because the economy can't recover until we do that.

ARNOLD: There would be some administrative costs, but Frank says the new bill wouldn't be a bail out. For homeowners to qualify they'd have to be able to afford a reasonable interest rate, and their lender would have to take a haircut on the loan. That is reduce the amount owed to 90 percent of the current value of the house.

Rep. FRANK: It means the lenders have to accept the fact that they're going to lose money, but we think they are better off recognizing that loss than going to foreclosure and losing even more money and dragging everybody else with them.

ARNOLD: The government would then use the Federal Housing Administration to guarantee the loans, allowing outside companies to do the refinancing. Some housing advocates like the idea but economist Mark Zandi with MoodysEconomy.com is skeptical.

Mr. MARK ZANDI (Economist, MoodysEconomy.com): It's still a voluntary plan and I don't think that's going to be enough. I think we're going to need something bigger and bolder given the scope of this problem.

ARNOLD: Meanwhile Treasury Secretary Henry Paulson yesterday unveiled a plan of his own. This one aimed at preventing a future mortgage crisis. Paulson called for the licensing of mortgage brokers and he said regulation had to be strengthened to keep pace with all the recent innovations in home lending.

Chris Arnold, NPR News.

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