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HUD slams Democrats’ $300B FHA expansion plan

FHA modernization must come first, HUD says

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The Bush administration has come out against a proposal by House Democrats for a massive expansion of FHA loan guarantee programs that's aimed at helping refinance up to 2 million loans in cases where lenders agree to principal write-downs. "An attempt to shift costs to taxpayers would constitute a bailout," Acting Housing Secretary Roy A. Bernardi said in a letter to lawmakers Thursday addressing legislation introduced by Rep. Barney Frank, D-Mass. Frank estimates the program could incur losses of up to 2 percent, or $6 billion, but argues that it would not constitute a bailout because lenders would be allowed to recover no more than 85 percent of a property's current value as payment for existing loans. The proposed bill, HR 5830, the FHA Housing and Homeowner Retention Act, would also protect against borrowers flipping refinanced properties at a profit by giving FHA a share of future home-price appreciation. The House Financial Services Committee this week hel...