Paulson ‘Supports’ FDIC Foreclosure-Prevention Plan

Matthew Cover
CNSNews
November 19, 2008

Treasury Secretary Henry Paulson supports the idea of a foreclosure-prevention plan that could put the government on the hook for 50 percent of a mortgage-servicing company’s loss should it renegotiate a bad mortgage — and the renegotiation fails.

• A d v e r t i s e m e n t

But he doesn’t want to use TARP (Toxic Asset Relief Program) money – the $700 billion bailout money Congress approved before the election – to pay for it.

On Tuesday, Federal Deposit Insurance Corporation (FDIC) Chairman Sheila Bair told members of the House Financial Services Committee that $24 billion of the bailout funds should be used to prevent families from losing their homes from foreclosure. She warned that it is “essential” for the Treasury Department to offer loan guarantees and credit to help keep people in their homes.

Bair’s plan, however, is that Treasury take over a loss-sharing “foreclosure-prevention plan” already in place at FDIC – one that commits the federal government to pay for 50 percent of a bank’s losses if it renegotiates a customer’s mortgage – and the customer defaults again.

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