Questions Remain Over New Aid Plans

San Jose Mercury News (CA) (04/01/08) ; Zibel, Alan
Senate Banking Committee Chairman Christopher Dodd, D-Conn., and other Democrats insist that achieving housing market stability and helping struggling homeowners are more important right now than a plan to restructure financial regulation. Lawmakers are considering several proposals that would refinance $300 billion to $400 billion in problem loans through the FHA, allow bankruptcy judges to rewrite mortgage terms and devote federal dollars to communities hit hard by foreclosure. The refinancing program proposed by Dodd and House Financial Services Committee Chairman Barney Frank, D-Mass., might not win the support of Republicans who worry about the plan interfering with the market at a time when home sales could be recovering. Others insist the plan might not be necessary because the government already has reduced interested rates and expanded the role of Fannie Mae and Freddie Mac. Meanwhile, critics say the plan would burden taxpayers in the event that the refinanced mortgages default; and there are questions surrounding how the homes would be valued, whether investors would agree to reduce the value of their investments and how to ease rising foreclosures among investors who purchased homes with the goal of flipping them for profit if they are excluded from the initiative.