WASHINGTON (AP) - Offering federal aid for strapped mortgage holders, the White House outlined proposals Friday to help borrowers hard hit by credit problems and the housing slump.
The initiatives, to be formally unveiled by President Bush, were intended to help homeowners with risky mortgages keep their homes. Bush also was to discuss efforts to prevent these kinds of problems from arising in the future.
It was the administration's first efforts to deal with an expected wave of mortgage defaults fueled by the subprime-mortgage crisis.
White House press secretary Tony Snow said he could not provide an estimate of how much the proposals would cost taxpayers or what affect they would have on the housing market. He bristled at questions about why the measures had not been taken sooner. "I'm sure we'll have plenty of time for backseat driving," Snow said.
The White House said the plan was not a bailout for lenders or speculators.
One of the key elements of Bush's plan would allow homeowners with a good credit history, but who cannot afford their mortgage payments, to refinance into mortgages insured by the Federal Housing Administration to keep from defaulting.
Earlier this month, Bush predicted that the ongoing decline in the housing market wouldn't become precipitous, but would result in a "soft landing."
He rejected any direct government aid to homeowners losing their houses to foreclosures, saying he only supported federal government help that would encourage refinancing and educate prospective home buyers about risky mortgage terms.
"Anybody who loses their home is somebody with whom we must show enormous empathy," the president said at an Aug. 9 news conference. "The word `bailout,' I'm not exactly sure what you mean. If you mean direct grants to homeowners, the answer would be
no, I don't support that."
On Friday, Bush planned to:
- Urge Congress to pass legislation that would give the Federal
Housing Administration more flexibility in assisting mortgage holders with subprime mortgages.
- Pledge to work with Congress to reform the tax code to help troubled borrowers rework their loans.
- Call for rigorously enforcing predatory lending laws and strengthening lending practices.
Foreclosure and late payments have spiked, especially for so-called subprime borrowers with blemished credit histories or low incomes. Higher interest rates and weak home values have made it impossible for some to pay or to keep up with their monthly mortgage payments. Some overstretched homeowners can't afford to refinance or even sell their homes.
Mortgage foreclosures and late payments are expected to worsen. Some 2 million adjustable rate mortgages are to reset to higher rates this year and next. Steep penalties for prepaying mortgages have added to some homeowners' headaches.
The economy enjoyed a strong revival in the spring although growing troubles in housing and credit markets have darkened prospects considerably since then. The Commerce Department reported Thursday that the gross domestic product grew at an annual rate of 4 percent in the second quarter - the strongest showing in more than a year.
But that growth could be the best showing for some time as the economy continues to be battered by the worst housing slump in 16 years and a widening credit crisis that has sent financial markets on a roller-coaster ride in recent weeks.
(Copyright 2007 by The Associated Press. All Rights Reserved.)