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Paul Kiesel
Paul Kiesel
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Bush to Veto Foreclosure Rescue Bill

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President Bush has repeatedly said that he would veto any House or Senate housing bill/ foreclosure package that helps out lenders and/or speculators. Of course, it’s interesting he continues to say this as everyone is well aware of the “bailout” Bear Stearns received back in March from the Fed. Now, another foreclosure package is making its way out of the Senate, even amongst all the superfluous trouble brought on by the news of Senator Dodd’s VIP loan, and this package is receiving strong bipartisan support.

However, it remains to be seen if the Senate will pass this bill by July 4th with enough support to override a Bush veto. If they’re not able to, Bush has guaranteed to veto it.

The main points of the bill are: The FHA would provide $300 billion in new, cheaper mortgages for distressed homeowners who otherwise would be considered too financially risky to qualify for government-insured, fixed-rate loans. However, borrowers would only be eligible for the bill if their mortgage holders were willing to take a substantial loss and allow them to refinance. A portion of the profits from the new loans would be shared with the government.

The beneficiaries of this proposed Senate package are not the lenders, whether it appears the lenders are being helped out because their capital losses would potentially be mitigated, the troubled borrowers and other homeowners in neighborhoods with escalating foreclosure rates end up as the winners. The longer foreclosed property stays on the market and increases in volume, the worst it is for the entire economy and other homeowners inadvertently affected by the foreclosure crisis.

As Senator Obama pointed out yesterday, “It’s baffling why the White House would oppose a bill that would help so many American families at risk of losing their homes on the same day hundreds of mortgage fraud arrests were announced,” (CNNMoney.com, 6/19/2008), it just doesn’t make sense why a government backed effort isn’t occurring, considering the financial aid expediently used to help keep Bear Stearns alive. However, since the Bush Administration and the Fed ignored many warnings about a “bubble burst” and a potential wave of foreclosures, maybe it makes even more sense as to why the White House is doing little to help remedy this problem.