Federal Deposit Insurance Corp. Chairwoman Sheila Bair has urged the U.S. Treasury Department to consider a $50 billion bailout program. The program, which will use the $700 billion funds in the financial rescue plan, aims to encourage banks to modify and lower mortgage payments and allow homeowners to continue living in their homes.
One proposal under the bailout plan is for banks to lower loan interest rates in the period of five years. The U.S. government would then guarantee the modified mortgage even if homeowners will once again default on their payments.
Senator Mel Martinez, a Department of Housing and Urban Development former secretary who gave his support to the $700 billion bailout plan, believes that abating foreclosures is the key to solving the economic and financial crisis. He praises the way Bair addresses the housing market problem.
Meanwhile, Senator Bill Nelson, who did not support the $700 billion bailout plan, points out that financial institutions involved in the bailout program should be compelled to modify or refinance any mortgages they hold for homeowners who are under threat of foreclosure.
The mechanics of the rescue plan for homeowners who are under threat of foreclosures are expected to be complicated. They may involve a lower mortgage principal and interest rates.
It is also expected that the biggest problem facing those responsible for the bailout planís implementation is choosing eligible recipients for the program.
Many Americans owe mortgages more than the value of their properties. It is not clear what the bailout plan can do to those homeowners who are diligent payers and to those who avail of reasonable mortgages on properties they could pay but may lose their homes because of not having any jobs.
However, it is expected that the relief package will successfully reduce foreclosures, which in turn will alleviate the economic crisis.
Cassiano Travareli has been educated in the finer points of the foreclosures market over 5 years.