Sheila Bair Of Fdic Optimistic Of Her Foreclosure Mitigation Plans

December 5th, 2008 | Tags: Foreclosure

Although the present Bush administration has not encouraged her, Sheila Bair of Federal Deposit Insurance Corporation is hopeful that President-elect Barack Obama will support her foreclosure mitigation plan that she had introduced last November. She said, “We’re encouraged by the president-elect statement on foreclosure prevention. I’m hopeful that the future administration will find funding to launch it because we are behind the curve and falling behind every day.” She was speaking at a conference held in Washington.

Sheila Bair wants $24.4 billion from the $700 billion TRAP (Troubled Asset Relief Program) for modifying soured loans and thus put a brake on foreclosures. She presses her point by stressing that such a package will be in keeping with Emergency Economic Stabilization Act that had been given the green signal by the Bush government on 3rd October. By taking up this measure 1.5 million foreclosures would be averted and it would simultaneously encourage lenders to advance loans.

Bair was disappointed that Henry Paulson, the Treasury Secretary refused to use TARP funds for this package. However she claimed that she was optimistic that he will come round to her view and allow it to proceed. She said, “I don’t know that he said he would oppose it. Paulson has said he thinks it’s a good program but he doesn’t want to fund it with TARP funds, but we think the authority is there under the statue.”

Recently Paulson said that he was willing to take a new approach to the foreclosure relief plans but he would not go to the extreme point of accepting the proposal put forth by Bair. Paulson commented, “We are continuing to examine potential foreclosure mitigation ideas that may be an appropriate and effective use of TARP resources. We’re continuing to work on it.”

Hitherto Paulson had been categorical in his opposition to the proposal of Bair but his very recent comments made last Monday show that he is perhaps changing his mind. Barney Frank the chairperson of House Financial Services Committee said that he is continuing to have talks with both Bair and Paulson about this matter.

Some experts opined that most probably Paulson would sanction $2 billion from the funds that had been made available by the Congress to implement the preliminary part of the programme of Bair. By it servicers would get fees worth $1,000 for advancing loans worth $2 million. The second part would be a plan for sharing loss.