Frank Seeks $35B Slate of Housing Remedies: Some Elements of Plan Resemble Ideas Floated by B of A
Kaper, Stacy, American Banker
WASHINGTON -- House Financial Services Committee Chairman Barney Frank is preparing a $35 billion housing package that would expand the government's role in combating the subprime mortgage crisis.
The package has at least four parts. It would call for $15 billion of government assistance to refinance distressed mortgages through the Federal Housing Administration and $20 billion to provide assistance to states and localities to repurchase foreclosed properties.
It would also call for legislation that would protect servicers that make certain loan modifications from lawsuits and expand housing counseling for struggling borrowers.
Details of Rep. Frank's plans were revealed in a release from House Speaker Nancy Pelosi, D-Calif., and a House Financial Services budget committee document circulated Tuesday. Rep. Pelosi's release said the legislation would be offered in March.
Rep. Frank first laid out broad concepts for his housing plan when he announced his committee agenda in January, and since then the Massachusetts Democrat's staff has been hashing out ideas and collecting input from industry groups, consumer organizations, and the Treasury Department.
According to the committee budget document, to assist in refinancings and prevent 1 million foreclosures, Rep. Frank is suggesting $15 billion over five years for a program that would likely use the FHA "and may involve the federal government purchasing loans."
The concept appears similar to one floated recently by Bank of America Corp. for the government to assist in purchasing and refinancing delinquent loans. In a Feb. 13 interview, Rep. Frank said he was in discussions with Bank of America about his proposal.
Under Rep. Frank's plan, the existing holder of a mortgage would be required to write down the loan to a level the homeowner could afford. The writedown requirement would not apply to investor-owned and second homes.
The committee document said the panel "is also exploring options to limit federal government exposure and thus reduce costs" such as requiring "a limited soft second mortgage to the government that would enhance recoveries resulting from future property sales."
Rep. Frank is also considering allocating $20 billion of grants and loans for purchasing foreclosed homes at or below market value in an effort to stabilize housing prices and prevent spillover costs from foreclosures.
In the interview, Rep. …