CNNMoney.com Senior Writer
The Bush administration wants to help beleaguered financial institutions – and prevent the financial crisis from getting worse – by spending $700 billion to buy up troubled mortgage securities.
But many struggling homeowners are asking: "Where's my bailout?"
Democratic lawmakers have taken up their battle and say they will include more help for homeowners as part of the proposal, according to Rep. Barney Frank, D-Mass, who heads the House Financial Services Committee. Final details are still being hammered out, but it appears that the idea is gaining traction.
Here's how the bailout could work: Once the Treasury Department takes hold of the securities, it can review the terms of the underlying loans and the financial shape of each homeowner. The department then could opt to modify the loans – by reducing the interest rate or principal balance – to affordable terms for borrowers.
The problem, experts said, is that the mortgages will be bundled into investments and sold. Therefore, the ownership of each loan is divided among all the investors who purchased the security.
And that complicates the process of helping individual homeowners.
Filed under: Economy
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