Panel to Vote on Mortgage Fund

Wall Street Journal (04/18/08) P. A4; Lueck, Sarah; Paletta, Damian
A proposal from House Financial Services Committee Chairman Barney Frank, D-Mass., would allow FHA to insure up to $300 billion in refinanced mortgages, requiring lenders to first write down loans that are worth more than the value of the property. The federal government would spend $3 billion to $6 billion on such a program, estimates the Congressional Budget Office, and defaults and foreclosures would lead to losses between 1 percent and 2 percent. Similar legislation likely will be proposed by Senate Banking Committee Chairman Chris Dodd, D-Conn., but it remains to be seen whether Republicans--many of whom believe a refinancing program amounts to a bailout of borrowers who exceeded their budgets--will support the bill. Frank's proposal also calls for a study by the Federal Reserve on the need for an auction or other action to handle large-scale refinancings. The committee will vote on the bill in the next few days and also will consider a plan that would help states and cities cope with foreclosures by offering them loans and grants.