A Democratic proposal to spend billions of dollars to buy failing U.S. home loans to prevent foreclosures does “not seem to be the right tool for this task,” Treasury Undersecretary Robert Steel told the Reuters Housing Summit.
The proposal was floated recently by Christopher Dodd, a Connecticut Democrat who chairs the Senate Banking Committee. The plan is reminiscent of the Home Owners Loan Corporation founded by the government in 1934 to refinance homes during the Great Depression. Dodd said his proposal would buy troubled mortgages at current, discount prices and issue new loans to borrowers under more favorable terms.
Steel said that while the Bush administration is open to other ideas to help distressed borrowers stay in their homes, it first wants to evaluate efforts by the Hope Now alliance of mortgage lenders and servicers.
