They had come up with highly rewarding programs under the name Hope Now and even launched a consortium of six different banks to come to the rescue of the mortgage borrowers.
Now, the Fed as well as the Bush administration is willing to offer further help and working toward a government rescue of distressed homeowners and mortgage lenders. Bernanke is trying hard to push the banking industry into forgiving major chunks of many mortgages and have given clear indications that only market forces would not be sufficient to prevent a broader economic calamity
He is also of the view that the Federal Housing Administration must further expand its insurance program to let more people switch from expensive subprime mortgages to federally insured loans.
The government based mortgage companies, Fannie Mae and Freddie Mac, are expected to raise a huge money so they could buy more mortgages. The companies already guarantee or hold as investments about $1.5 trillion in mortgages. It was in the last week that the limits were removed on these 2 companies about the volume of mortgages that Fannie Mae and Freddie Mac can hold in their own portfolios. That means the two companies could buy up billions of dollars in mortgages that other investors have been too frightened to touch.
In theory, the change should not cost taxpayers. But because the companies are chartered by Congress, investors have assumed that Congress would bail them out if needed. Fannie Mae and Freddie Mac can borrow money more cheaply than private banks largely because of the assumed government backing. The move, which administration officials had previously opposed, increases the limits on F.H.A., Freddie Mac and Fannie Mae mortgages from $417,000 to as much as $729,750.
| So overall, atleast the US government, the Fed and the administration is not sleeping. They are taking preventive steps to avoid what could end up in a major economical calamity for the citizens of US, especially those ridden by the heavy and costly mortgage loans. | Table of Contents |
