Connecticut Senator Christopher Dodd has proposed a new way to help households at risk of foreclosure. During a hearing of the Senate Banking Committee, Dodd said he is working to create a Home Ownership Preservation Corporation.
Dodd, the chair of the Banking Committee says he believes thereâ€™s broad ideological agreement on providing help for victims of the subprime mortgage crisis. The corporation heâ€™s proposing would buy mortgage securities that are backed by risky subprime loans, giving the original investors a better price than theyâ€™d achieve if they recovered the cash by putting properties through foreclosure. The loans on the at-risk properties would then be restructured to make them more affordable for homeowners. Dodd told the hearing he believes speed is of the essence.
"Rather than a case-by-case approach, such an entity would purchase and restructure these loans in bulk, to help many borrowers as quickly as possible. Every day that goes by without action means that more families are losing their homes."
Such a fund might cost between $20 and $25 billion in taxpayers money to set up, and some republican members of the committee said they were concerned about rewarding homeowners who had borrowed unwisely. Proponents of the idea say it should benefit the whole financial system by reactivating mortgage securities and allowing companies to reenter the marketplace.