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More to help the housing market

Steve Henn Sep 20, 2007
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More to help the housing market

Steve Henn Sep 20, 2007
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Doug Krizner Fannie Mae and Freddie Mac were created to keep money flowing through the mortgage market. But in the current crisis, they’ve been limited in their ability to help.

Yesterday, though, regulators changed that by allowing Fannie and Freddie to increase their holdings of subprime loans. And there may be other changes coming. Treasury Secretary Henry Paulson is considering a temporary increase in the size of mortgages Fannie and Freddie can package into securities.

Later this morning, Mr. Paulson and Fed Chairman Ben Bernake speak to Congress on America’s housing market and what can be done to fix it. Marketplace’s Steve Henn has this preview:


Steve Henn: Last month, President Bush called on the Federal Housing Administration to help almost a quarter of a million families avoid foreclosure by easing refinancing for troubled borrowers. Earlier this week, the House passed its own plan to expand FHA assistance.

But housing advocate Bruce Marks is unimpressed. Marks runs the Neighborhood Assistance Corporation of America.

Bruce Marks: The Administration’s and the congressional proposals are insufficient and will have virtually no impact.

Alex Polluck, who follows home lending at the American Enterprise Institute, agrees the president’s proposal will probably need to be expanded to reach more people if it’s going to work. But:

Alex Polluck: Essential to this program in my view is that you have to find a way for the lenders to realize their losses.

Translation: this won’t fly with conservatives if it becomes a giant bank bail-out. Polluck believes banks that made risky loans need to write down their losses and work with borrowers to keep them in their homes.

In Washington, I’m Steve Henn for Marketplace.

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