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Loan mods could restore confidence

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A plan for the government to partially insure lenders when they agree to modify troubled borrowers' loan terms could help stabilize housing markets, restore confidence, and bring buyers back into the market.Federal Deposit Insurance Corp. chairwoman Sheila Bair wants the Bush administration to provide incentives for lenders to do as many as 2.2 million loan modifications. Under a proposal unveiled by the FDIC Friday, the government would pay servicers $1,000 for each loan modified to defray their expenses, and then agree to cover up to 50 percent of losses if a loan should re-default.Assuming one in three modified loans were to re-default, the plan would cost taxpayers $24.4 billion, but prevent 1.5 million foreclosures by the end of next year, the FDIC said.The plan and others intended to stem foreclosures could help stabilize housing markets, but "speed is of the essence," said Paul Bishop, managing director of research for the National Association of Realtors. NAR, which h...