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Officials at the Federal Deposit Insurance Corp. (FDIC) Thursday detailed
a plan to prevent 1.5 million foreclosures in the next year by offering
financial incentives to companies that agree to sharply reduce monthly
payments on mortgage loans.
The proposal, which has the support
of leading congressional Democrats, would considerably expand the scope
and force of the government's efforts to stem foreclosures. Agency
officials estimated the cost to the government at $24.4 billion.
FDIC
Chairman Sheila C. Bair continues to face opposition within the Bush
administration. Treasury Secretary Henry M. Paulson, Jr., said Wednesday
that he opposed funding the plan from the government's $700 billion
financial rescue fund, which has been used primarily to rescue banks
and encourage lending. FDIC officials say they are still in talks with
the Treasury, but proponents increasingly view the Bush administration
as a roadblock with an expiration date.
"We think it's essential
that we actually strike at the underlying cause of the problems in the
financial markets," said Michael Krimminger, special adviser for policy
at the FDIC. "We think it's time to make a decisive difference in the
housing markets on foreclosures."
The FDIC proposal, which is
scheduled to be announced today, goes farther toward helping borrowers
than existing modification efforts. At the same time, the initiative is
designed to be less expensive for mortgage companies because the
government would pick up part of the tab.
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