Congress To The Rescue

House Financial Services Chairman Barney Frank (D-Mass.) wasted no time scheduling his first hearing on the financial market crisis that unfolded last weekend.

His office formally announced Frank will convene a hearing April 9 on a mortgage “rescue plan” he auspiciously unveiled the week before the Bear Stearns debacle.

Frank plans to have a witness list that includes federal regulators, academics, economists and “representatives of the cities and communities that are being negatively impacted by high numbers of foreclosures.”

His proposal would allow the Federal Housing Administration to insure up to $300 billion in new mortgages for lenders who agree to refinance struggling homeowners into more affordable loans.

To get the FHA guarantee, lenders would have to slash the outstanding principle. Frank’s office estimates the plan could avoid as many as 2 million foreclosures. The goal is to get the bill to the House floor by early May.

Frank outlined the plan at a March 14 press conference with Senate Banking, Housing and Urban Affairs Chairman Chris Dodd, who is working on a similar proposal — but has not gone as far as Frank in releasing actual draft text. Dodd did tell reporters in a Monday conference call that he’s now on board with Frank’s idea to use the FHA to spur refinancings; Dodd had originally envisioned creating a separate government entity to do the job.
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