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President Bush make note that mortgage companies are responsible for their own actions…

It took awhile for President Bush to insert his administration into the growing number of foreclosures on homes financed with high-risk mortgages. He said at the outset that the government has only a limited role to play and he was clear on what the government would not do:

“A federal bailout of lenders would only encourage a recurrence of the problem. It’s not the government’s job to bail out speculators or those who made the decision to buy a home they knew they could never afford.”

The crisis in so-called sub-prime mortgages affects only a fraction of the giant housing market, and as such might be viewed as only a small cloud in an otherwise sunny outlook for the economy as a whole. But home foreclosures have an enormous psychological impact on consumer confidence. And they generate the kind of anecdotal horror stories that can stampede Congress into ill-considered legislation.

There are short-term solutions available - slashing interest rates, pumping up the money supply - but they tend to have nasty long-term consequences, familiar to those who endured the 1970s.

The president announced a number of steps, some that will need congressional approval, to aid homeowners caught between rising mortgage payments and housing values that are flat or declining. The Federal Housing Administration would be allowed to help homeowners delinquent in their payments by guaranteeing mortgages refinanced at more favorable rates. And Internal Revenue Service rules would be amended so that homeowners who agree with their lenders to reduce the amount of their loans don’t lose their homes anyway because they can’t afford to pay taxes on the amount of the reduction. Congress is also being asked to raise the limits on mortgages the FHA can insure. Continued…

Source: Cincinnati Post