A mortgage rescue to help hundreds of thousands of struggling homeowners avoid foreclosure and get more affordable, safer loans passed the Senate overwhelmingly Friday, but it faces a bumpy road amid continuing turmoil in the housing market.

The 63-5 vote reflected a keen interest by Democrats and Republicans to send election-year help to distressed homeowners with economic issues topping voters' concerns.
...
To make it more palatable to Republicans, the Senate measure would take responsibility for any losses away from taxpayers and instead cover them by diverting an affordable housing fund drawn from Fannie Mae and Freddie Mac profits.

Profits from government-sponsored mortgage giants Fannie Mae and Freddie Mac, instead of taxpayers, would back up a home loan rescue for up to 500,000 strapped borrowers under a plan approved by a key Senate committee Tuesday to pull the nation out of a housing crisis.
...
The bill also tightens regulation of Fannie Mae and Freddie Mac, which would finance a new affordable housing fund that would temporarily be used to pay for the foreclosure prevention program.
...
Borrowers would have to show they could afford the new loans, and to share with the government half of their new equity and any future proceeds from selling or refinancing again. Mortgage holders would have to write down the existing loans at a substantial loss, in exchange for avoiding a costly foreclosure.

WASHINGTON - The Bush administration, trying to deal with a worsening housing slump, announced a new initiative Tuesday aimed at helping homeowners about to lose their homes. For qualified homeowners, it will put the foreclosure process on hold for 30 days.
ADVERTISEMENT

Dubbed "Project Lifeline," the new program will be available to people who have taken out all types of mortgages, not just the high-cost subprime loans that have been the focus on previous relief efforts.
...
"Project Lifeline is a valuable response, literally a lifeline, for people on the brink of the final steps in foreclosure," Housing and Urban Development Secretary Alphonso Jackson, said at a joint news conference with Treasury Secretary Henry Paulson.

He said the goal was to provide a temporary pause in the foreclosure process "long enough to find a way out" by allowing homeowners and lenders to negotiate a more affordable mortgage.

Paulson said that the new effort was just one of a number of approaches the administration was pursuing with the mortgage industry to deal with the country's worst housing slump in more than two decades.

The U.S. Treasury Secretary Henry Paulson Jr. said Tuesday that the administration was exploring what would be a significant expansion of the program to help at-risk mortgage holders.

Paulson, in an interview on CNBC, said the administration was involved in discussions with the mortgage industry to expand a current program to freeze adjustable rate mortgages for five years to include borrowers of loans at prime rates. Currently, the rate freeze only covers a much smaller segment of adjustable rate loans, those made to subprime borrowers. Those are borrowers with weak credit histories.

Paulson said he would consider expanding a support scheme with the Hope Now alliance "beyond subprime borrowers to other borrowers,"
...

The National Association of Realtors (NAR) applauded the U.S. House and Senate this week for passing the Mortgage Cancellation Tax Relief Act -- a piece of legislation that, if passed, will change the current tax code so distressed borrowers who have loans forgiven through a foreclosure or short sale will not be taxed on the difference.
...
"If the property is sold at foreclosure or is sold for less than was borrowed, that difference is considered income and is subject to the tax," NAR said in a press release. "The Mortgage Cancellation Tax Relief Act would ensure that any debt forgiven on any mortgage debt secured by a principal residence will not be taxed. The legislation includes a provision to safeguard abuses."

KANSAS CITY, Missouri (Reuters) - Treasury Secretary Henry Paulson, on the second day of a tour seeking to build support for a government-sponsored mortgage relief plan, on Tuesday said it was not a bailout for people who made bad financial decisions.

"Foreclosures are very costly to lenders and investors as well as harmful to homeowners," Paulson said in an interview on Fox News Channel. "There's no bailout with government money, none whatsoever."
...
But the Bush administration proposal has met skepticism, with critics warning it may make some lenders wary about future lending because they see the government stepping in to change terms. Others say people should bear the consequences of their bad decisions.
...

The U.S. House of Representatives also passed legislation on Tuesday that would for three years erase the tax bill that many homeowners would face as they struggle with burdensome home loan payments.

...
"So what the industry has done is come up with some streamlined procedures to fast-track these modifications to approximate what would have happened under normal market conditions if there was more time," he said.

WASHINGTON - The Federal Reserve endorsed new rules Tuesday that would give people taking out home mortgages new protections against shady lending practices.
ADVERTISEMENT

The proposed rules, approved in a 5-0 vote by the board, are geared to providing safeguards to the riskiest "subprime" borrowers, already painfully stung by the housing and credit debacles. The proposal is expected to apply to new loans made by all types of lenders, including banks and brokers. The plan could be finalized next year.
...
When the housing market went bust, subprime loans were most heavily affected.

Of the nearly 3 million subprime adjustable-rate loans surveyed by the Mortgage Bankers Association from July through September, a record 4.72 percent entered the foreclosure process during those months. At the same time, a record 18.81 percent of the subprime adjustable-rate loans were past due.

WASHINGTON - Hundreds of thousands of strapped homeowners could get some relief from a plan negotiated by the Bush administration to freeze interest rates on subprime mortgages that are scheduled to rise in the coming months.

"There is no perfect solution," President Bush said Thursday as he announced an agreement hammered out with the mortgage industry. "The homeowners deserve our help. The steps I've outlined today are a sensible r
...
"We should not bail out lenders, real estate speculators or those made the reckless decision to buy a home they knew they could never afford," Bush said after meeting with industry leaders at the White House. "But there are some responsible homeowners who could avoid foreclosure with some assistance."

Bush said 1.2 million people could be eligible for help. But only a fraction will be subject to the rate freeze. Others would get assistance in refinancing with their lenders and moving into loans secured by the Federal Housing Administration, Bush said.
...
"The Congress has not sent me a single bill to help homeowners," Bush said.

WASHINGTON (Reuters) - The White House on Friday said it was "premature" to discuss possible new steps to address the mortgage crisis and declined to comment on reports that officials are working on a deal with lenders to freeze interest rates on some loans.
ADVERTISEMENT

"It's premature to talk about those discussions at this point," White House spokesman Scott Stanzel told reporters, when pressed on whether the administration is working on a new initiative regarding the mortgage market.

CINCINNATI (Reuters) - A plan to freeze mortgage rates for troubled homeowners may help ease the U.S. housing crisis, but for wiser borrowers and those who have already lost their homes to foreclosure, such a plan seems unfair.

"It's people's own fault that they didn't pay attention to what was going on," said Cincinnati high school teacher Peter Parker, 32, who cautiously borrowed more than $400,000 in the last two years to buy two investment properties.

"It's not the government's job to bail them out."
...
While the details are not yet known, the prospect of a plan to rescue hundreds of thousands of homeowners from a deepening mortgage crisis has quickly won both fans and critics, including those who say a bailout sets a bad example for irresponsible banks and borrowers.

"The government is punishing people who were more responsible in the way they took out mortgages," said Peter Schiff, president of Euro Pacific Capital in Connecticut. "Of course they're going to be pissed."
...
"It's callous to say, but they shouldn't be helping these people," Parker said, adding that as a history teacher, he worried about the example it was setting for Americans.
...
Supporters of the plan, including some on Wall Street, say that without help for troubled homeowners there will be a knock-on effect hitting every part of the economy, from jobs to spending power to retirement savings.

WASHINGTON (Reuters) - The Treasury Department and mortgage industry leaders are putting the final touches on a plan that could save struggling homeowners from foreclosure by freezing interest rates before they reset sharply higher.

With more than 2 million subprime borrowers facing higher mortgage costs and the possible loss of their homes if they cannot meet the payments, Treasury Secretary Henry Paulson is expected to announce details of the plan as soon as Wednesday, sources familiar with the matter told Reuters.
...
News of the initiative helped lift stock prices, which had been battered in recent weeks by growing global credit strains and billions of dollars of write-downs on bad mortgage bets by major financial institutions.
...
The plan will likely be discussed on Monday at a housing conference organized by the Office of Thrift Supervision. Executives from two major lenders -- Countrywide Financial Corp (CFC.N) and Washington Mutual Inc (WM.N) -- are expected to take part.

As more states and cities struggle to find the money to bail out homeowners caught up in the housing downturn, some Americans wonder why the government should reward people for their greed or irresponsibility.

Some, like Thomas Roach of Sarasota, Fla., are even actively campaigning against a bailout for people who, using easy credit and exotic mortgages, bought more home than they could afford on a bet to make easy profits from rising real estate prices.
...
"What the government doesn't realize is that these people knew what they were getting into. They just thought that these housing prices were going to keep going up and up," Roach said. "A bailout sets such a bad precedent. You're encouraging bad behavior."
...
Sacramento resident Steve Law said he is aware that lending agencies could fail and buyers are losing their homes but doesn't think taxpayers should be asked to come to the rescue.

"I don't really feel we should bail anyone out because that costs everyone in the end. They got themselves into the situation," he said of lenders and over-stretched home buyers.
...
Jim Gaines, a research economist at the Real Estate Center at Texas A&M University, also thinks a hands-off approach - other than policing for fraud and predatory lending - is needed from the government.

"I don't know whether if it's the government's role to protect people from themselves," he said.

Gaines also pointed out that the institutions in the market probably will clean up the mess faster than the government because "they're the ones that have money on the table."

Already, lenders, which have been criticized for allowing loose underwriting standards to create these toxic mortgages, are working overtime to rework mortgages for struggling borrowers.
...
Some lenders, such as Wells Fargo Home Mortgage, are contacting borrowers six months before their interest rate resets to evaluate whether they can manage a higher payment. If not, the lender will modify their loans. Others are teaming up with local housing and credit counselors to come up with a workable repayment plan or loan workout.

In a press release last week, the president of the National Association of Realtors applauded Bush's FHA mortgage bailout proposal, and admitted that the Association has been pushing for the bailout since early 2007. If the NAR continues to have their way, taxpayers will be forced to clean up the mess the realtors helped to create.
...
If you thought that there was nothing else that the NAR could do to discredit themselves further, you were wrong. In a recent press release, NAR president Pat Combs made it clear to everyone that the Association isn't looking out for public interests, but rather, their 6 percent commission check.

According to Combs' statement, the NAR applauds Bush's mortgage bailout because the proposed changes to FHA guidelines will 'ease the crisis in the mortgage industry'.
...
The NAR neglects to mention that the proposed changes will also bail out the lenders who thoughtlessly offered exploding ARM loans in the first place. Also not mentioned: when somebody refinances into an FHA guaranteed loan, the risk is transferred to taxpayers. If the newly refinanced borrowers default on their mortgage once again, it will be American taxpayers who eventually pay off the loan.
...
They want to keep those 6 percent commission checks rolling in. The more people pay for a house, the more realtors make in commission. That's why they were so eager to encourage housing as an investment during the boom, and so eager to encourage the bailouts now.

Bill Gross says we will all pay - one way or another - for the current housing mess. So why not bail out the parties who can least afford the losses: homeowners?

It's not the kind of populist chat you'd expect from one of Wall Street's most powerful bond traders, though he happens to work overlooking the Pacific at Pimco in Newport Beach.
...
"I'd ask my critics," Gross told me after the idea hit the press last week, "how else will you solve it?"
...
Perhaps the Fed could come in and dramatically lower the short-term rates that set many adjustable mortgages. That could ease the financial burden on many troubled homeowners.
...
"We just have to suck it up, so the next time the abuses will not occur," Gross says.

Perhaps a bigger hurdle is getting past the "market forces" argument. Many people will argue that many financially strapped homebuyers took calculated risks that backfired. Market forces will now make them pay for their mistake. Gross, the ultimate capitalist, thinks this isn't the time for an economics lesson for the masses.

"Does (a bailout) give help to those who didn't read the fine print? Yes! Does it help speculators trying to make a buck? Yes!" Gross admits. "But the ambulance doesn't pass you by as you're lying there bleeding because the accident was your fault."

"Why did the people who didn't qualify get into the mortgage in the first place -- and who made the quick profits on that? Somebody on Wall Street, somebody in the securities business? Somebody else is holding the paper now and they're going to lose it."

This didn't take long. The National Association of Realtors (NAR) -- you know, the trade group that spends millions lobbying our legislatures in order to ensure those fat, 6% cuts on residential housing sales -- is in favor of President Bush's proposed housing bailout, beginning with Federal Housing Administration changes and including the proposed tax break to be given to debtors whose banks hand them a pile of money in the form of debt forgiveness.
...
By bum-rushing buyers into bidding wars in hot markets (I saw one from the inside, once) and issuing positive spin to gullible mainstream media outlets, the Realtors could create a self-fulfilling prophecy, for a while. But now the roof is on fire, as all of those exotic mortgages threaten to toast the NAR's crop of gullible buyers. Unfortunately for them, an inevitable result of the NAR's getting people to bid up houses and buy with zilch down payments is that far fewer homes and buyers qualify for FHA assistance.

Although the NAR helped make this mess, now that its 6% is on the line, it wants the taxpayers to clean it up. The press release is worth reading if only to see the depths of the NAR's ignorance. It calls for the president and Congress to deliver a dose of medicine that would kill the patient entirely, including raising FHA loan limits and reducing or eliminating cash down payments altogether.
...
If the NAR gets its way, the people of the U.S. who didn't go out and spend irresponsibly during this housing bubble will be tasked with stepping in to guarantee the bad loans of those who did, spurred by the 6-percenters at the NAR. That might not even be enough to reanimate the dead monster bubble, but it might buy those Realtors a few more months of commissions.

According to a recent Fox News poll conducted by Opinion Dynamics, there's 70% opposition to a taxpayer sub-prime bailout. "It is amazing all the sympathy we are seeing from politicians for people who knowingly took out loans they couldn't afford, often lying on their applications to do so," commenter "srl" posted at the LA Land blog I write for the Los Angeles Times. "Usually," added "Brian," "when the facts are examined closely, we find people who . . . took a chance that house prices would keep rising, that they could remodel the kitchen, buy the truck and the motorcycle, put it on the credit card and pile that debt into the next refinance. ."
...
How can these people oppose helping out their fellow Americans? Easy. Many or most of them saw this crisis coming years ago -- not through any real estate wizardry but by observing the signs that have been in front of us through most of this decade. In large parts of the United States -- and in all of Southern California -- the housing market turned into an obsession, a mania. So when the mortgage industry nearly collapsed this summer, Americans were fully versed in 100% financing, "liar loans," "teaser rates" and "flippers." There was no mystery here, no unforeseen "perfect storm."

And yet now, just as the market is starting to cool and possibly provide buying opportunities, many of these folks -- especially those patiently waiting out the bubble -- find themselves crashing a pity party for the very buyers who priced them out of the market. They are furious that the government appears interested in supporting overextended borrowers and high prices....
...
Politicians, by rushing to the defense of recent home buyers, give the appearance of endorsing price stability at historically high levels...Why should government favor today's owners over tomorrow's buyers?

There could be some help on the way for thousands of Las Vegans facing foreclosure on their homes. That's if President Bush gets his plans approved.

The president says his proposals are not intended to "bail out" lenders or speculators. Instead, as News 3's Robert Santos reports, his plan is designed to help troubled borrowers keep their homes.
...
Christine blames predatory lenders for signing her up on a mortgage she tried so hard to avoid in the first place. "I thought this guy was the nicest and most honest guy."

And she's not alone. There are thousands of people across the country already in default, facing foreclosure. Nevada is the number one state for foreclosures, up 93 percent from this time last year.

Friday morning, President Bush outlined ways the federal government can help troubled borrowers. Plans he says that are not intended not to bail out lenders and speculators. "This program will allow Americans who've got good credit history but cannot afford their current payments to refinance into FHA insured mortgages," the president said.
...
Bush's plan, even if approved, won't come fast enough for Christine and for others already facing foreclosure.

"Bob Cooley, mortgage broker in Walnut Creek, said that Bush's plan is too small and too slow to make much of an impact on those facing foreclosure. 'But let's see the details. And how fast can this be turned around?' he said."

"Cooley said he and his partner have done fewer than 10 FHA loans in the past year because few homes are priced that low in the East Bay. Prices are dropping, however, especially in high foreclosure areas."

Three years ago, builder Tom Doucette was "moving at 100 miles per hour" trying to keep up with the demand for new homes at his project sites. Potential buyers were "camping out" at his FCB Homes subdivisions, hoping to snatch up a piece of real estate at the peak of the housing boom.

Business is no longer a blur for Doucette...[A]ctual construction has slowed dramatically. In Lodi, for example, the number of building permits issued for detached single family homes has plummeted from 396 for all of 2005 to just 18 so far this year, according to city records.
...
The shaky housing market has led Lodi builder Dennis Bennett to build only pre-sold homes...Overall, Bennett said his company has reduced new home construction by 50 percent compared to just a couple years ago.
...
Bennett, who started his company in 1977, said there are a number of reasons for the building slowdown. The media should take some blame for continuing to highlight the trend, he said. Large, corporate home builders are also part of the problem. They've flooded regional markets with new homes creating "huge inventories." That, in turn, lowers sale prices for smaller builders.
...
Bennet said new construction won't boom again until the "huge inventories" of homes for sale are bought up. Easing some of the recent mortgage restrictions and offering federal relief to those with expanding subprime mortgages might be two ways to bring buyers back, he added. "If we get a little relief from the lending side of the business, hopefully that will help the inventory out there," Bennett said.

In the last few years, the mortgage industry aggressively pushed special subprime loans to people whose troubled credit histories disqualified them from conventional mortgages. These subprime loans typically featured low introductory interest rates that ballooned into much higher payments after a brief period.

Lenders made about 6 million subprime mortgages between 1998 and September 2006, according to the Center for Responsible Lending, a North Carolina advocacy group. Now, as teaser rates expire, about 2.2 million households are in danger of losing their homes, the center projects.

FHA estimates that 80,000 households will take advantage of the Bush program to switch into conventional government-guaranteed mortgages.

"That's a lot, but not compared to those facing foreclosure," said Jordan Ash, financial justice director of the nationwide fair-housing advocacy group ACORN, the Association of Community Organizations for Reform Now.
...
[The President] announced several other initiatives:

-- The president called on the mortgage industry to adjust terms on existing loans to make it easier for borrowers in trouble to repay.

-- The administration is imposing rules that will require lenders to disclose loan terms more clearly. And it will seek to punish lenders that lie to borrows or commit other kinds of fraud.

-- The Department of Housing and Urban Development will step up its program to provide counseling to homeowners who face foreclosure.

-- Bush will support legislation similar to a bill passed by the House of Representatives in 2006 that would let the FHA insure bigger loans.

-- The White House will also back bipartisan legislation to remove on a one-time basis a provision of the tax code that forces homeowners to pay tax if lenders forgive mortgage debt.

President Bush on Friday proposed solutions for homeowners facing rising interest rates on their mortgages that could cost them their homes.
...
Bush called on Congress to pass legislation that would reform the Federal Housing Administration and renew its role in insuring mortgages for first-time homebuyers and those with low to moderate incomes. If passed by Congress, the agency would offer more options to homeowners needing to refinance to get away from unaffordable loans.
...
"It is a step in the right direction," said John Marcell, immediate past president of the California Association of Mortgage Brokers and president of Upland-based Better Mortgage Brokers.
...
Chapman University Economist Esmael Adibi said the president's proposal will provide more relief in relatively affordable San Bernardino and Riverside counties than in coastal counties like San Diego and Orange counties where houses generally are more expensive.

Adibi said that his concern is putting taxpayers at risk if the homeowners later go into default on the FHA-insured mortgages.
...
Adibi also said that he objects to a proposal to bail out lenders that made a lot of money making risky loans.
...
"What I am not in favor of is a general bailout because people were greedy or stupid," Wunderlich said.

A new subprime loan bailout program could help thousands of Rio Grande Valley property owners avoid delinquent mortgages and looming foreclosures.

On Friday, President Bush said the federal government would expand its Federal Housing Administration refinancing program for subprime borrowers with good credit.
...
"It will really help out people that are in trouble," said Lupita Garcia, a broker at South Texas Mortgage in Harlingen.
...
More than 27 percent of all McAllen-area loans are subprime, the highest rate in the country, according to LoanPerformance, a lending research company in California. In Brownsville and Harlingen, the rate is close to 22 percent, the sixth highest in the nation.

Some locally based lenders offered subprime loans, but national firms such as Countrywide Financial and Wells Fargo have underwritten most such loans across the country.
...
While some borrowers may be saved by the new bailout program, the plan doesn't address subprime lending companies, several of which are reeling financially and are straining the overall economy.

"A federal bailout of lenders would only encourage a recurrence of the problem," Bush said, according to the White House transcript of his comments. "It's not the government's job to bail out speculators, or those who made the decision to buy a home they knew they could never afford."