A top House Democrat threatened Monday to tie up the remaining half of the $700 billion financial industry rescue money unless the Bush administration provides some of it for borrowers facing foreclosure.
WASHINGTON — A top House Democrat threatened Monday to tie up the remaining half of the $700 billion financial industry rescue money unless the Bush administration provides some of it for borrowers facing foreclosure.
“They’re not going to get the (money) unless they get very serious about the foreclosure modifications and showing us how we’re going to get some lending out of the banks,” Rep. Barney Frank, D-Mass., told reporters after speaking at a housing industry conference in Washington. “At this point I don’t see that happening.”
The Treasury Department says $335 billion has been allocated from the first half of the program, which was enacted more than two months ago. Treasury Secretary Henry Paulson, who is overseeing the program, is weighing tapping the second $350 billion.
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The main goal of the program is to get financial institutions to lend money more freely again.
The Bush administration has focused mainly on voluntary industry efforts to modify loans, and those have not stopped the surge in foreclosures.
“Imagine how many foreclosures we would have if the financial system had been allowed to collapse,” Neel Kashkari, director of the Treasury Department office overseeing the $700 billion program, said at the same conference.
But critics say many citizens and lawmakers were led to believe some of the money would go to avoiding foreclosures and are frustrated that it has yet to do so.
In a report to be released today, a special bipartisan commission chaired by former HUD Secretaries Henry Cisneros and Jack Kemp takes aim at the Bush administration for the foreclosure crisis, citing its lax enforcement of fair-housing laws and lackluster response to problems that have disproportionately hit poor and minority populations.
Labeling the system “broken,” the seven-member panel calls for the creation of an independent agency separate from the Department of Housing and Urban Development to more vigorously enforce fair-housing laws.
“The federal government needs to be in the business of getting things done,” said Kemp, who served in the Cabinet of Bush’s father. “And right now, fair-housing enforcement is not getting done. That’s why we need a new, independent agency that won’t get mired in politics.”
Discussion at Monday’s forum focused on how broad the government’s intervention should be, rather than whether the government should play a role.
The U.S. is on track for 2.25 million foreclosures this year, more than double traditional levels.
Mark Zandi, chief economist at Moody’s Economy.com, said the public is likely to be more sympathetic to efforts to assist borrowers, because the link between the foreclosure crisis and the sinking economy is increasingly clear in the minds of most Americans.
“It’s now in every corner of the country,” Zandi said.
However, data released Monday show more than half of all homeowners who had their loans modified to make the payments more affordable in the first half of the year are in default again.
The data raise questions about whether federal money may be better spent on creating jobs, rather than averting foreclosures, said John Reich, director of the federal Office of Thrift Supervision.
But the reports aren’t detailed enough to show how well the programs are working or which borrowers have been most helped, said FDIC Chairman Sheila Bair.
The report “raises more questions than answers because it fails to define, in any meaningful way, the modifications that have redefaulted,” she said in a statement e-mailed after the forum.
“It’s impossible to make any judgment about the redefault rates of sustainable modifications versus cosmetic modifications that by their nature are more likely to redefault.”
Associated Press writers Jeannine Aversa, Christopher S. Rugabe and Daniel Wagner contributed to this report.