Dodd's Back With A Big, New Housing Proposal

Sen. Chris Dodd (D-Conn.) wasted no time getting back to his day job Wednesday.

The chairman of the Senate Banking, Housing and Urban Affairs Committee unveiled a proposal to create a government entity to purchase troubled mortgages at “a steep discount” to their current marketplace value. Calling it the Federal Homeownership Preservation Corporation, Dodd said the entity would ensure that investors and lenders “take a ‘haircut’” rather than get a government bailout.

The discounts would be passed on to homeowners in the form of new, lower-balance fixed rate mortgages, Dodd said in a letter to Senate Majority Leader Harry Reid (D-Nev.), outlining the proposal along with other housing-related measures to include in the stimulus bill.

Dodd, who said he’s still working on the proposal, suggested setting the fund up with $10 billion or $20 billion initially.

Troubles in the subprime housing market, which has all but collapsed, lie at the heart of the current recession worries.