Democrats call for "mortgage czar," borrower aid

By Patrick Rucker

WASHINGTON (Reuters) - Democratic leaders in the U.S. Congress called on Wednesday for the appointment of a "mortgage czar" to help stem a jump in foreclosures and $200 million of fresh funding to help troubled borrowers save their homes.

Foreclosure filings have soared in recent months as borrowers with shaky credit have been unable to afford escalating loan payments.

About 1.7 million home loans will go into foreclosure this year and next, according to estimates by Moody's Economy.com. U.S. lawmakers have called this a national catastrophe in the making.

"This crisis is the equivalent of a slow-motion, 50-state Katrina, taking people's homes one by one, devastating their lives and destroying their communities," Sen. Christopher Dodd, chairman of the Senate Banking Committee, said at a press conference.

Dodd, along with fellow Democratic Sen. Harry Reid, the Senate Majority Leader, and Nancy Pelosi, the speaker of the House of Representatives, called for the current limit on Fannie Mae and Freddie Mac investments to be lifted so the mortgage finance companies can buy more troubled home loans.

The two government-sponsored enterprises, or GSEs, are under orders from their federal regulator, the Office of Federal Housing Enterprise Oversight, to freeze investment holdings near their current level of a combined $1.4 trillion.

The regulator has said those caps, imposed over a year ago, could be lifted in February. But lawmakers said they should be lifted now in the face of a crisis.

"We're standing here today saying 'Mr. President, February is hundreds of thousands of foreclosures away,'" said Sen. Charles Schumer, Democrat from New York. "The time to act with sensible policies is today -- not months from now."

Schumer has introduced legislation that would let Fannie and Freddie increase their investment holdings for one year.

SOME FRANK TALK

Rep. Barney Frank, chairman of the House Financial Services Committee, said on Wednesday that he could support a "one-year, temporary increase of the portfolio" even though he previously opposed what he called such a "piecemeal approach" to reform.

Still, the Massachusetts Democrat said that he would not go as far as other Democrats who support increasing the size of loans that Fannie and Freddie may purchase above the current ceiling of $417,000. Mortgages above that level are known as "jumbo" loans.

"I would not do anything that's going to relieve pressure for a bill. Raising the (investment) caps indefinitely or raising the jumbo loan would do that," he said.

In May, Schumer first called for fresh grants to non-profit groups that counsel on foreclosure prevention and Democratic leaders on Wednesday endorsed giving $200 million in such a program.

The lawmakers also called for a new mortgage czar to be appointed by U.S. President George W. Bush to coordinate the federal response to increased foreclosures.