The Obama Administration will only use $50 billion from the $700 billion financial industry bailout package to fund the government foreclosure prevention program. Fannie Mae and Freddie Mac will contribute over $20 billion to the $75 billion loan modification program.
The money will be used to subsidize interest rates to assist distressed borrowers' so their monthly payments can be lowered to affordable levels.
The foreclosure prevention program requires doubling the Fannie Mae and Freddie Mac lines of credit they have with the federal government to $200 billion each.
The Department of Housing and Urban Development will contribute the remaining money towards the modification program which will be used for credit counseling programs for consumers in extreme debt.
The government will use the money to provide incentives to borrowers, mortgage loan servicers and mortgage investors to encourage loan modifications. HUD is conserving the remaining $350 billion from the package by drawing on Fannie Mae and Freddie Mac for funds.
The Obama Administration will use the money to stimulate consumer and business lending and provide additional capital to banks.
An excellent way to keep the bailout money focused on the financial industry is by using other federal funds to support the loan modification program. However, the federal government is the one providing the funds which ultimately comes from the taxpayers.
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