At this point, clearly the Bush administration is stalling on following FDIC Chairwoman Sheila Bair’s recommended loan modification plan.  Lawmakers have begun taking matters into their own hands.  Last week, Rep. Maxine Waters, D-California, introduced the first legislation incorporating Bair’s proposal to systematically restructure mortgages and provide a government guarantee against default. The measure is estimated to ultimately save 1.5 million homeowners from foreclosure and would cost $24.4 billion, which Waters would take from the $700 billion financial industry bailout bill.  “The current foreclosure crisis continues to spiral out of control and our current programs for dealing with this crisis are simply not getting the job done,” Waters said.  Waters’ action is one more sign that Democratic lawmakers want more to be done to help minimize the crisis of delinquent homeowners. Rep. Barney Frank, D-Mass., head of the powerful House Financial Services Committee, said Monday that any new proposals involving the bailout funds must include foreclosure prevention programs.  Waters’ bill, however, will likely have to be reintroduced when the new Congress takes office next year unless similar measures are worked into any new bailout proposals. Several banks, and mortgage lending companies Fannie Mae and Freddie Mac, have recently put their own loan modification plans into place. And as part of its federal bailout, Citigroup must start provide loan modifications in accordance with Bair’s guidelines.

Meanwhile, the number of homes falling into foreclosure is rising daily. A record 1.35 million homes are in foreclosure and a historic high 6.99% of borrowers are behind on their payments, the Mortgage Bankers Association reported last week.  Bair has been a vocal advocate for rolling out a systematic mortgage modification plan and she actually put her loan mod plan into action with IndyMac, which the FDIC took over in July.  Reports have indicated that FDIC officials had a role in restructuring over 5,000 home loans as of mid-November.

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1. [...] insiders hope that the government jumps on board with the mortgage relief that has been promoted by Sheila Bair’s FDIC loan modification plan the renegotiates the mortgage balance to be reduced to 38% of the borrowers income versus the [...]

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