Ed's Blog

I have to commend President Bush for taking the initiative to address the ongoing mortgage mess in his recent press conference. The fact that he not only recognizes the need for reform, but that he’s pushing for Congress to act on legislation (which could potentially prevent thousands of homeowners from losing their homes via foreclosures,) is to be applauded.

His initial outlined proposals, which could include naming California a “high cost state,” are sound. This would allow for the federally backed mortgage powerhouses, Fannie Mae and Freddie Mac to raise their conforming loan limits to $625,500 I California. Anyone living near the coast or the city centers can attest that this still won’t be enough for all properties, but the current limit of 417K doesn’t cover much at all. In this sense, it’s better than nothing, and a very good start.

His second proposal, which outlined a plan for the modernization of FHA, also makes a great deal of sense. The reason that so many homeowners are in subprime adjustable mortgages that they can’t afford when they reset is largely due to the fact that in recent years FHA loans weren’t viable for hundreds of thousands of homeowners. The disappearance of FHA loans is more than likely the catalyst that sparked the emergence of so many exotic subprime loans. Had FHA loans been able to be secured for homeowners with less than stellar credit, or with income documentation obstacles, they likely wouldn’t have been lured into a subprime loan, which boasts a much higher interest rate, and is subject to regular increases.

Alas, hindsight is always 20/20.

While Bush offers no plan to bail out Wall Street or the lenders who made these loans, his support is clearly behind the American homeowners who are facing trouble. For that, his efforts should be praised.

What remains to be seen now, is whether or not Congress will follow his lead, and push these plans into play. Stay tuned, and cross your fingers that those who we elected to look out for our best interests, will do right by us, and get the mortgage reform ball rolling…