White House fiddles – while foreclosures set new records and Congress burns.

According to Equifax, 4.46% of mortgages were more than 30 days overdue at the end of March. A year ago this figure was 2.92%. The highest rates were in Puerto Rico (8.03%), Florida (7.03%) and Nevada (6.59%).

The foreclosure rate jumped to 1.39%, more than double the .58% rate of a year earlier. One banking firm expects this rate to continue rising until the middle of 2009!

Economy.com estimates that more than 10 million homes are now “underwater” — the mortgage exceeds the current home’s value. In these cases, the owners have no equity in the house and little incentive to keep paying the mortgage.

In response to this growing crisis, the Bush administration is, ever so slowly, stepping up efforts to get lenders to settle loans by agreeing to a “cram down” of the interest or the principle to affordable numbers, and then getting FHA insurance for the loan rather than foreclosing. They started this plan some time ago, but to make it available to more homeowners, the White House has loosened the restrictions so that 100,000 more homeowners can qualify. No government money would be involved.

Barney Frank (D-Ma) says this is a “half-assed” way to do it. He thinks the government should offer insurance for between $300 billion and $400 billion worth of mortgages, which might allow as many as one million homeowners (ten times the administration’s number) to move to less costly loans. House Democrats agree with Barney, but Republicans are opposed, and they probably have the votes in the Senate to kill the bill.

No one knows how much the administration plan would cost, but Congress’s plan would cost between $10 and $20 billion at worst, and could actually make money since the insurance being sold by the FHA to the lenders might generate more premium than the losses.

If you can’t wait for this to be settled, check other blog entries under “Foreclosure” for possible help with your mortgage problems, or read our articles on mortgages. And don’t forget that many states have their own programs.

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