Paulson’s Measures To Combat Foreclosures

January 17th, 2008

Henry M. Paulson, Treasury Secretary is on a three-city tour to defend the government’s move to prevent foreclosure filing by millions of property owners on the brink of defaulting.

Liberals are of the opinion that the “Paulson Plan,” which aims to restructure certain subprime mortgages to higher interests, is inadequate to offset foreclosures by hundreds of thousands of homeowners.

Conservatives on the other hand believe that people who made unsound investments and erroneous financial judgments are unable to meet their contractual terms, and the administration is bailing them out of this situation. The government is manipulating the existing agreements to give a breather to these people, thereby discouraging investors out to make money from the mortgage market.

In reply, Paulson in a community center of a Florida city, reminded both the liberals and the conservatives that a government’s prime concern is to avoid the breakdown of the economy- and in current scenario averting further foreclosures are of utmost importance. This plan has been designed keeping the interest of the home owners in mind, and aims to help reduce the number of foreclosures over a period of time.

Despite indications of a healthy economy, this Florida city has witnessed a seven per cent drop in property rates and foreclosure filings are increasing rapidly.

Defending his plan, he reiterated that although it would be impossible to solve wholly the housing crises, it would most definitely help a whole lot of people. He insisted on government’s efforts through legislations to restrict the backbreaking financial crunch cropping due to foreclosures.

Moreover, the Treasury Secretary emphatically made clear the Bush administration’s decision to support and allow mortgage guarantors Fannie Mae and Freddie Mac to buy the high-value loans, if Congress approves judicial decision to thoroughly look over the government-chartered housing-finance companies.

Paulson discussed further the need to steady the financial markets by assembling and making the top bankers to formulate a fund to buy assets from structured investment vehicles (SIVs). SIVs buy intricate mortgages and assets.

He emphasized that a special fund would also come into being by the end of next year to allow those SIVs not managed by the banks to sell their assets into dysfunctional markets. It would also give opportunities to those SIVs under the banks’ management to sell their assets into such markets.

Paulson is working to incorporate certain other such measures to avert additional financial disaster and damages to the economy caused by the credit crisis.