Bush Offers Relief for Some on Home Loans
WASHINGTON, Aug. 31 — President Bush, in his first response to families hit by the subprime mortgage crisis, announced several steps today to help Americans who have credit problems meet the rising cost of their housing loans.
President Bush, with Treasury Secretary Henry M. Paulson, right, and Secretary of HUD, Alphonso R. Jackson, announced a plan to help prevent foreclosures for Americans with poor credit.
In remarks this morning at the White House, Mr. Bush said he would work to “modernize and improve” the Federal Housing Administration “by lowering down payment requirements, by increasing loan limits, and providing more flexibility in pricing.”
Administration officials said in advance of Mr. Bush’s appearance that the goal would be to change its federal mortgage insurance program in a way that would let an additional 80,000 homeowners with spotty credit records sign up, beyond the 160,000 likely to use it this year and next.
“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,” Mr. Bush said. “Yet there are many American homeowners who can get through this difficult time with a little flexibility from their lenders or little help from their government.”
The administration is offering his plan, which will include what one official called jawboning of lenders to persuade them not to foreclose on some borrowers, at a time of growing attacks on Mr. Bush from Democrats who say he has remained on the sidelines amid increasing anxiety over whether millions of Americans could end up losing their homes. Other elements of the plan would need legislative action, requiring Mr. Bush to win over the Democratic leadership in Congress.
He called for Congress to act quickly.
“The recent disturbances in the subprime mortgage industry are modest — they’re modest in relation to the size of our economy,” Mr. Bush said this morning. “But if your family is — if your family’s one of those having trouble making the monthly payments, this problem doesn’t seem modest at all.”
The main objective of the package, one senior official said, is not to affect the stock markets but to help low-income homeowners, many of them concentrated in certain neighborhoods in several distressed areas of the country, such as Ohio and Michigan.
“The primary focus is to help individuals who have an opportunity to stay in their homes to stay in their homes,” this official said. “The subprime mortgage situation is having a crushing effect on a lot of communities right now.”
Administration officials, who asked not to be identified, briefed a handful of news organizations on the proposals on Thursday evening. Despite the assertion that affecting the markets is not the goal, one administration official said concern about Wall Street’s reaction did affect the timing of the briefing. He said there was a fear that if the White House announced in the morning that Mr. Bush would be making an announcement on housing, there could be confusion as buyers and sellers of mortgage securities guessed what the announcement would be.
But secondarily, this official said, helping homeowners keep their homes and refinance or renegotiate the terms of the mortgages could have a stabilizing effect on the financial institutions that have these mortgages in their portfolios, and help them write down the value of the mortgages or sell them off at a loss.
“You can’t solve the problems in the financial markets unless you can make some progress on the retail end of it,” said this official. “This is also a step to get banks to start loaning again.”
Another factor in the decision to disclose details ahead of time was that Ben S. Bernanke, the chairman of the Federal Reserve, was planning to give a speech on housing this morning at the Fed’s annual conference in Jackson Hole, Wyo., and that speculation about his comments would also unsettle the markets.
As they put together the proposals, top administration officials consulted with financial institutions, some members of Congress, housing counseling groups, academic specialists, and also with Mr. Bernanke.
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