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Feds may guarantee 3 million loan mods

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The Bush administration is said to be considering a $500 billion government loan guarantee program that could provide lenders with the incentive to modify up to 3 million troubled mortgages, at a potential taxpayer cost of $50 billion. The Treasury Department and the Federal Deposit Insurance Corp. are reportedly negotiating the scope of such a plan, which could be carried out under the $700 billion troubled asset repurchase program (TARP). FDIC Chairwoman Sheila Bair dropped hints about such a program at a congressional hearing last week, saying the government could provide lenders with an incentive to modify the loans of troubled borrowers by agreeing to guarantee future payments Bair said the Emergency Economic Stabilization Act, which created the $700 billion TARP program on Oct. 3, gives the Treasury the authority to use loan guarantees and credit enhancements to facilitate loan modifications in order to prevent foreclosures. The government could establish standard...