| How long will the housing/mortgage crisis last? | | | | each modification made, ando Cover 50% of the |
| According to FDIC chairman Sheila Bair, well into | | | | loss if a borrower defaults after modification |
| 2010. The FDIC (Federal Deposit Insurance Corp.) | | | | The FDIC proposed that the program's cost -- |
| recently proposed a comprehensive program to | | | | over $24 billion -- should be funded by the $700 |
| ease the foreclosure crisis. | | | | billion bail-out. The treasury department points out |
| The program is not a cure-all, but will focus on | | | | that the FDIC's plan is a "spending" proposal; the |
| borrowers who have a good chance of avoiding | | | | bail-out is intended as an "investment" proposal. |
| foreclosure. It could save more than 1.5 million | | | | The plan has found great favor with congressional |
| homes in 2009. | | | | democrats. |
| The truth is, many borrowers are in default | | | | Qualifications for the program will be announced if |
| because they were not ready to be homeowners | | | | it is approved. One issue is that "net present |
| in the first place. Due to lax lending guidelines and | | | | value" would have to be established. Net present |
| deceptive mortgage practices, millions of loans | | | | value helps lenders determine whether they stand |
| originated were destined to fail. Some people are | | | | to make more of their money back through |
| in homes they simply cannot afford. | | | | foreclosure or through loan modification. The |
| The plan would reduce mortgage payments byo | | | | lender has the right to decide case by case |
| Reducing the interest rate, oro Extending the loan | | | | whether to modify or to foreclose. However, the |
| over a longer term. | | | | lender would forfeit that right if they used |
| To encourage lenders to participate, the | | | | deceptive mortgage practices or damaging loan |
| government wouldo Pay $1,000 to the lender for | | | | servicing methods. |