House Speaker Nancy Pelosi said Monday she is directing a key lawmaker to write legislation that would specifically require Treasury to take steps to help homeowners avoid foreclosure if it wants access to the second $350 billion in government bank bailout funds.
"It was very clearly spelled out in the initial legislation that funds would be used for mortgage foreclosure forbearance," Pelosi said at a news conference.
Pelosi asked House Financial Services Committee chairman Barney Frank, D-Mass., on Monday to write a bill that would require Treasury to modify some mortgages if it wants access to a government bank bailout fund.
Steve Adamske, a spokesman for the House Financial Services Committee, said Frank has begun work on the bill Monday and expects it to be ready sometime in the first week of January.
The legislation could be expedited should Treasury seek out the funds earlier. Adamske added that Frank is considering a number of foreclosure mitigation conditions on the funds, including a provision that could make some of the funds available to modify mortgages in a way that could help millions of homeowners avoid foreclosure.
Adamske added that the Frank bill may also include provisions to expand a Hope for Homeowners program that will refinance mortgages for borrowers who are having a hard time making their payments, but can afford a new loan insured by the Housing and Urban Development's Federal Housing Administration.
The measure may also press Treasury to allocate the funds to buy individual mortgages and mortgage backed securities. When Congress and the Bush administration approved a $700 billion bank bailout fund on Oct. 3, lawmakers expected the Treasury department to use the capital to buy mortgage backed securities and individual mortgages. But after markets continued to plummet, Treasury Secretary Henry Paulson chose instead to use a provision in the new law to buy large minority stakes in financial institutions as a means of quickly injecting confidence in the banks.
Any mortgage mitigation provision may be formed based on a proposal introduced by Federal Deposit Insurance Corp. chairwoman Sheila Bair. Bair is seeking $24.4 billion of the funds for a mortgage modification program she believes could avert 1.5 million foreclosures.