President George W. Bush said on Saturday he is looking to expand US efforts to help struggling homeowners reduce their mortgage payments, as Democrats pressed for a more substantial federal role. Bush said some 130,000 homeowners have used a Federal Housing Administration program to refinance unaffordable mortgages since it was announced last August.
"This is a good start, and my administration is committed to building on it," Bush said in his weekly radio address. "So we're exploring ways this program can help more qualified home buyers." Bush said 300,000 homeowners are expected to use the program by the end of this year, more than the FHA's initial estimate of 240,000 homeowners.
That is a fraction of the 10.3 percent of US homeowners, some 8.8 million in all, who owe more than their houses are worth, according to Moody's Economy.com. The mortgage crisis has triggered a wider credit crunch that threatens to drag the economy into a deep recession.
The program is aimed at homeowners who are having trouble making payments on adjustable-rate mortgages that have reset to higher rates. The program is currently limited to those with a strong credit rating who have at least a 3 percent equity stake in their homes, or cash to match.
Democrats in Congress envision a more direct role for the US government, which the Bush administration and congressional Republicans have so far resisted. Democrats in both the Senate and the House of Representatives are crafting legislation that would permit the FHA to offer $300 billion more in new guarantees to refinance distressed mortgages that banks and mortgage holders have agreed to write down.
"Our plan will help more families avoid foreclosure and gives cities the chance to rehabilitate foreclosed homes and put them back on the market," Illinois Rep. Bill Foster said in the Democrats' weekly radio address.
The Washington Post reported on Saturday that Bush administration officials are finalising a plan to help thousands more facing foreclosure by helping them refinance into affordable loans backed by public funds. The proposal is unlikely to be unveiled before Bush returns from a trip to Europe next week, the Post said.
During the housing boom, many borrowers took out adjustable-rate loans with the expectation they would be able to refinance their mortgage before the initial teaser rates expired, because of steadily rising house prices. But with prices now falling, about a fifth of subprime loans originated in 2006 are greater than the value of the home.