Government is about to release a new plan that would
help 3 million homeowners to avoid foreclosure.
Final deal has not been reached yet, but it should be
approved quickly. Government is planning to use $50 billion from the
approved bailout package of $700 billion.
The new plan calls for interest rate reductions and
period of five years. The Treasury Department said on Wednesday that
it is working with the FDIC and other policymakers on
foreclosure-prevention measures
'We are working with the White House and through the
policy process on a range of foreclosure-prevention options,' said
Treasury spokeswoman Jennifer Zuccarelli.
More than 4 million Americans are behind on their
mortgages and 500,000 have started foreclosure process according to
the Mortgage Bankers Association.
Program which would be managed by FDIC will be
available to banks, savings and loans, investment funds, hedge funds
and other mortgage holders, the source said. It would encourage the
lenders to rewrite the distressed mortgages, converting them into
affordable plans.
There is a plan to add second mortgages on homes such
as home equity lines of credit so that lenders would not lose any
money in a mortgage modification.
As more and more homeowners are facing foreclosures,
investors could no longer put a value on the securities which were
backed by pools of mortgages. So trading of these securities froze,
sending shock waves through the financial industry.
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