House Says Aye to Housing Plan Amidst Controversy

It’s been on the table now for a little while, and the House has said Aye to approve a federally-backed loan program for mortgage borrowers who can’t meet their monthly mortgage payments.

The package is aimed at preventing foreclosure, and while the House has passed it, it may still be vetoed by the White House and shot down by the Senate.

Approximately 1 1/2 million loans are eligible for the program, which would insure about 1/3 of these borrowers. But the insurance comes at a cost–about $1.7 Billion to taxpayers.

Barney Frank, the Democrat from Massachussetts and the Chairman of the House Financial Services, sponsored the proposal, which was passed 266-154.

In order to qualify for the package, lenders would have to cut a borrower’s debt to no more than 85% of the appraised value of a home. If the loan went into default, the FHA would cover the amount owed to the lender. But the package seems like a bad idea to those who say the package is really just a bailout for lenders, investors, and speculators who took a risk and lost.

According to Frank and other supporters of the package, the entire initiative is meant to help homeowners stay in their homes and avoid foreclosure, which would only further damage the entire industry, leading to more pain than not.