David Wessell on Dodd-Frank
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The Current State of Dodd-Franik

Jeanne Sahadi

Dodd-Frank: In a 266-154 vote... lawmakers approved... Frank... to let the Federal Housing Administration (FHA) insure up to $300 billion in new loans over four years if lenders agree to reduce the mortgage principal.

To qualify, the lender would have to cut the debt to no more than 85% of a home's current appraised value. If the FHA-refinanced loans went into default, the FHA would pay the lender the remaining principal owed.

While 1.4 million loans are likely to be eligible for such a program, the Congressional Budget Office estimates such a measure would end up insuring 500,000 borrowers. The CBO estimates the FHA expansion program would cost taxpayers $1.7 billion.

"This bill is very time limited and limited in specifics to a subset of mortgages and meant to mitigate a market failure," Frank said during the floor debate on Thursday.... [T]he program is limited to loans for owner-occupied residents... lenders and investors would be taking a loss on every loan... borrower[s] would be paying higher-than-usual premiums to the FHA... would share equity in their home with the government. "No borrower who goes through this process will say at the end of it, 'Boy, that was fun. Where do I buy a ticket to get back on Space Mountain?" Frank said.... If the bill is a bailout for anyone, they say, it's a bailout for communities across the country, which suffer when home values and property taxes go down because of foreclosures...