- The Washington Times - Thursday, October 4, 2007

Democratic leaders yesterday called for the Bush administration to appoint a federal mortgage czar to coordinate a government response to the nation’s growing number of home foreclosures, likening the mortgage crisis to Hurricane Katrina.

They also proposed $200 million in foreclosure prevention funding, and further raising portfolio caps for Fannie Mae and Freddie Mac, the government-sponsored enterprises that just had their caps raised last month.

“If we do not act, subprime lending could end up eliminating more homeowners than it created, and the number of Americans foreclosed out of their homes could exceed the number of Americans from the Gulf Coast forced out of their homes by Hurricane Katrina,” said Senate Majority Leader Harry Reid, Nevada Democrat.

Democratic leaders proposed giving government-approved nonprofits money to counsel homeowners who are having trouble making their mortgage payments, citing a Joint Economic Committee report in April that said it costs an average of $1,500 to help a family refinance a loan. Nearly 130,000 families could be helped with $200 million in federal funds, according to the lawmakers.

Mr. Reid and House Speaker Nancy Pelosi, California Democrat, announced the plan at a joint press conference yesterday that also included Democratic Sens. Christopher J. Dodd of Connecticut and Charles E. Schumer of New York and Reps. Barney Frank of Massachusetts and Carolyn B. Maloney of New York. The Democrats accused White House officials of being slow to address the depressed market for subprime loans.

“This is a national crisis,” Mr. Reid said. “Too bad it’s taken so long to realize that we have a crisis.”

President Bush last month suggested expanding eligibility requirements for refinancing loans guaranteed by the Federal Housing Administration. He also supports legislation that would allow homeowners to avoid taxes on forgiven debt in loans that are now being restructured.

White House spokesman Tony Fratto defended the administration’s handling of the subprime lending problem.

“If you want to talk about inaction, you need to look no further than Congress,” he told the Associated Press yesterday.

Foreclosure filings more than doubled in August over the same month last year to nearly 244,000 filings, a 36 percent jump over July, according to RealtyTrac Inc.

Last month, the government agency in charge of Fannie Mae and Freddie Mac said the mortgage finance agencies could assume 2 percent more debt, though the increase is less than Democrats wanted.

Taxpayer advocacy groups dismissed the Democrats’ proposals as unnecessary government intervention.

“The Democrat answer for everything is to create a new government agency,” said Ryan Ellis, director of tax policy at Americans for Tax Reform, of the mortgage czar proposal. “The answer to this is a combination of tough love — let people sleep in the beds they have made — and tax relief.”

Pete Sepp, spokesman for the National Taxpayer’s Union, agreed.

“This would send precisely the wrong signal to financial markets at precisely the wrong time,” Mr. Sepp said. “We’re now seeing the beginnings of a correction in this market that might shake out soon enough to minimize the damage. If lenders know that government will be coming to the rescue, there will be zero incentive” for people to work out their problems on their own.

Mr. Sepp said the rationale of the proposal could also be a slippery slope that would lead to other government entanglements.

“You could take the logic to the most ridiculous degrees,” he said. “We might as well be helping people whose gardens have gone dead in the drought.”

Sean Lengell contributed to this article.

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