Christopher Dodd: President Bush’s Real Estate Plan Too Late
Senate Banking Committee Chairman Christopher J. Dodd today saw some promise in President Bush’s new initiatives to help homeowners facing a loss of their homes — but also saw reasons for concern.
Bush announced the effort in the Rose Garden. “The government’s got a role to play, but it is limited,” the president said. “A federal bailout of lenders would only encourage a recurrence of the problem.”
One of the major parts of the Bush plan is to permit homeowners who have strong credit histories, but are having trouble making mortgage payments, to refinance into loans insured by the Federal Housing Administration.
Dodd, who is helping lead a congressional effort to modernize and give the FHA more authority to help distressed homeowners, said he hoped Bush”s “aggressive support will result in a strong bipartisan vote for FHA legislation when we take it up later this fall.” Bush indicated he would back such legislation.
The president’s other initiatives today included a promise to work with Congress to revamp the tax code to help certain borrowers recast their loans, and he called for stronger enforcement of predatory lending laws.
“Let’s say the value of your house declines by $20,000 and your adjustable rate mortgage payments have grown to a level you cannot afford,” Bush said.
“If the bank modifies your mortgage and forgives $20,000 of your loan, the tax code treats that $20,000 as taxable income. When your home is losing value and your family is under financial stress, the last thing you need to do is to be hit with higher taxes.”
Bush also said the administration would launch a new foreclosure avoidance initiative to help homeowners figure out a way to refinance. He said Housing Secretary Alphonso Jackson and Treasury Secretary Henry Paulson would reach out to groups that offer foreclosure counseling and refinancing assistance for homeowners.
And he vigorously rejected the idea of direct government aid, a position he has held for some time.
“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,” Bush said. “Yet there are many American homeowners who could get through this difficult time with a little flexibility from their lenders or a little help from their government.”
Bush’s comments drew widespread praise.
John M. Robbins, chairman of the Mortgage Bankers Association, said the president’s attention to turmoil in the mortgage markets and the plight of homeowners facing foreclosure will help push Congress to reform FHA.
“It is essential that the Federal Housing Administration have the tools and flexibility to adjust its products and programs to meet the evolving needs of borrowers,” Robbins said.
What troubled Dodd was what the president did not say.
“For too long this president has sat on his hands, as families were losing their homes and others called for action,” said Dodd, a candidate for the 2008 Democratic presidential nomination. “His action today, while welcome, is late.”