WASHINGTON A U.S. House of Representatives
panel that writes rules for the financial services industry is
due on Thursday to outline a new federal program that could buy
$300 billion in troubled home loans.
The plan conceived by Rep. Barney Frank, chairman of the
House Financial Services Committee, would give the Federal
Housing Authority fresh funds and a new directive to catch home
loans headed for foreclosure.
As outlined, the bill would allow the FHA to finance $300
billion of home loans and up to 2 percent of that amount is
expected to be lost, according to a memo produced by Frank's
office that cites research from the non-partisan Congressional
The Bush administration opposes Frank's sweeping plan to
expand the FHA and has pitched its own plan to retool the
largest government-backed homebuyer aid program.
Since his fellow Democrats hold a majority on the panel,
Frank's version of legislation is likely to pass largely intact
although members will try to add their own provisions to the
bill during Thursday's debate.
On Wednesday, Frank said that he does not expect lawmakers
to finish drafting the bill on Thursday and that he has blocked
out time next Wednesday to continue the work.
The Federal Housing Administration was created during the
Great Depression of the 1930s to give low-income families help
buying a home. Borrowers who use the program can win a cheaper
loan because the FHA guarantees monthly payments.
The wave of failing home loans has grown over the past 12
months, so far costing banks an estimated $200 billion in
write-downs while pushing the economy toward a recession.
The mortgage crisis began with high-cost, "subprime"
available to borrowers despite damaged credit.
Proponents of comprehensive reform say that only a bold
government intervention can steer the U.S. economy away from a
On Tuesday, the leading Republican on the panel said he
would advocate for a modest liberalization of the FHA meant to
help current borrowers.
The plan from Spencer Bachus, an Alabama Republican, would
expand "participation in a program that helps subprime
borrowers transition into more sustainable FHA loans," the
Alabama Republican said in a statement.
(Reporting by Patrick Rucker, Editing by Gary Crosse)