Senate Banking Committee Chairman Chris Dodd, D-Conn., has introduced plans for the Federal Homeownership Preservation Corp. According to a letter sent by Dodd to Senate Majority Leader Harry Reid, this entity would ‘purchase outstanding mortgages at the steep discounts at which they are currently valued in the marketplace, ensuring lenders and investors take a 'haircut' and are not being bailed out.’
‘These discounts would then be passed onto homeowners in the form of new, lower-balance mortgages insured by FHA or backed by the housing government-sponsored enterprises,’ Dodd further explained. ‘Thus, the program would take advantage of the existing mortgage distribution system.’
Dodd estimates that $10 billion to $20 billion will be needed for the initial capitalization of the entity.
