Housing Rescue

FT.com: Fate of US housing rescue in the balance

The fate of legislation to use public money to guarantee billions of dollars of refinanced mortgages and strengthen the regulation of government-backed mortgage companies, was in the balance on Thursday as members of the US Senate banking committee gathered to vote on the proposals.

The aim is to halt the wave of foreclosures by allowing the FHA to guarantee refinancing of up to $400bn (€260bn, £205bn) in loans to reflect lower house prices, with lenders voluntarily agreeing to forgive a chunk of their loans.

A reminder on the Fed bailout of Bear Sterns:

J.P. Morgan Chase & Co. is buying battered broker Bear Stearns Cos. for $236 million in a Federal Reserve-backed bailout unprecedented in scope and execution.
The Federal Reserve, which cut the discount rate in a coordinated move with its announced backing of the deal Sunday evening, is taking the extraordinary step of providing special financing in connection with this transaction.

The Fed has agreed to provide financing of up to $30 billion of less-liquid assets held by Bear Stearns. Roughly $20 billion of that funding will back mortgage securities.