Since foreclosure is still escalating all over the country, FDIC Chairperson Sheila Bair proposed to use $24.4 billion from the $700 billion Troubled Asset Relief Program (TARP). She is now appealing to the incoming Obama administration to see this fund through.
The said program is within the Emergency Economic Stabilization Act approved by the Bush administration last October 3. It hopes to avoid 1.5 million foreclosures and reassure the lenders for payments.
To Chairperson Bairís disappointment, Treasury Secretary Henry Paulson seems to be concerned and shows some disapproval to Bairís proposal. Last month, Paulson expressed his worries about the foreclosure problems, but did not agree on using the TARP fund. He must be seeing a different approach to the panic-worthy foreclosure problem and a more apt use for the TARP.
House Financial Services Committee Head Barney Frank has been negotiating with Paulson on Bairís project. It would be really disappointing to see this beneficial project go into waste.
Now, the Treasury Secretary seems to be more solicitous. It is speculated that Paulson may approve a $2 billion fund based from the Emergency Economic Stabilization Act to jumpstart Bairís proposal. This fund will be used to pay up $1000 lender administration fee for 2 million mortgages. This will really help some millions with foreclosure trouble.
But Bair is still seeking for the approval of the remaining $22.4 billion foreclosure-plan fund. This may be used for loss sharing programs between lenders or financers and the FDIC for mortgages that fail 6 months after modification.
Foreclosure is one of the upsetting effects brought about by the economic recession of 2008. We just have to cross our fingers and hope that soon to be inaugurated President Obama will agree on using some federal money to pay up and solve foreclosure problems.
Leticia Carvalho has been educated in the finer points of the foreclosure market over 5 years.