Budgeting to buy troubled mortgages
TEXT OF STORY
Lisa Napoli: Sixty percent more homes are facing foreclosure. New numbers out from RealtyTrac show Nevada, California and Florida have the dubious distinction of the highest foreclosure rates. To avoid a mess like this in the future, today in Washington, Treasury Secretary Henry Paulson is expected to recommend a revamp of rules on home lending — including nationwide licensing standards for mortgage brokers. And Marketplace’s Sam Eaton says a coalition of community organizations will also be asking for help.
Sam Eaton: The National Community Reinvestment Coalition wants the federal government to buy up troubled mortgages from banks at a discounted rate, taking some of the pressure off strapped homeowners.
But the group’s president, John Taylor, says it’s not a bailout.
John Taylor: It’s really acting more as a cash advance agent to recoup these loans from Wall Street — so that they can be modified and restructured.
Taylor says once restructured, the loans can be sold back to the banks, keeping the government in the black.
But mortgage industry economist Tom LaMalfa says that’s wishful thinking in a time of sinking home values.
Tom LaMalfa: The bottom line is that the government is going to be on the hook for billions of dollars, tens of billions of dollars, given the magnitude of the potential problem.
LaMalfa says even if the government buys up mortgages at discounted rates, those discounts could become deficits if the mortgage crisis worsens, leaving the government holding the tab.
I’m Sam Eaton for Marketplace.
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