The president devoted his weekly radio address to a modest set of proposals he announced Friday to deal with an alarming rise in mortgage defaults, which has contributed to turbulent financial markets.
"The mortgage industry is going through a period of adjustment," Bush said. "And some Americans are worried about the impact this is having on their ability to make their monthly mortgage payments."
Foreclosure and late payments have spiked, especially for so-called subprime borrowers with blemished credit histories or low incomes. Higher interest rates and weak home values have made it impossible for some to pay or to keep up with their monthly mortgage payments. Some overstretched homeowners can't afford to refinance or even sell their homes.
Mortgage foreclosures and late payments are expected to worsen. Some 2 million adjustable rate mortgages are to reset to higher rates this year and next. Steep penalties for prepaying mortgages have added to some homeowners' headaches.
Bush's proposals would make it easier for borrowers currently holding adjustable rate mortgages to refinance using the resources of the Federal Housing Administration, a Depression-era agency created to help low- and moderate-income Americans afford homes.
An estimated 60,000 homeowners who have fallen behind on their payments because their mortgages have reset would be able to refinance with FHA-insured loans. That marks a significant change because now FHA does not insure refinanced loans from borrowers who are currently delinquent.
To qualify for the new program, being called FHA Secure, a borrower must prove that the original loan was being repaid until it reset to a higher rate and must have 3 percent equity in the home. The FHA does not supply the mortgage loan but it guarantees loans extended by banks and other lenders.
