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Mortgage Problems Continue To Expand

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The New York Times

Published: June 29, 2008

When Congress started fashioning a sweeping rescue package for struggling homeowners this year, 2.6 million loans were in trouble. But the problem has grown considerably in just six months and is continuing to worsen.

More than 3 million borrowers are in distress, and analysts are forecasting a couple of million more will fall behind on their payments in the coming year as home prices fall further and the economy weakens.

Those stark numbers not only illustrate the challenges for lawmakers trying to provide relief to their constituents but also hint at what the next administration will be facing after the election.

While the proposed program would help some homeowners, analysts say it would touch only a small fraction of those in trouble - the Congressional Budget Office estimates it would be used by 400,000 borrowers - and would do little to bolster the housing market.

"It's not enough, even in the best of circumstances," said Mark Zandi, chief economist of Moody's Economy.com. The number of people who will be helped "is going to be overwhelmed by the 3 million that are headed toward default."

Last week, the Senate voted overwhelmingly to advance the bill, and the House passed a version last month. Because of procedural delays in ironing out differences between the two houses, the Senate is not expected to pass the bill until after the Fourth of July recess.

The bill would let lenders and borrowers refinance troubled mortgages into more affordable 30-year fixed-rate loans that are backed by the government. Democratic leaders say Congress could send something to the president next month.

The White House, which initially threatened to veto the measure, has indicated that it is open to supporting the bill if certain provisions are removed.

"The Congress needs to come together and pass responsible housing legislation to help more Americans keep their homes," President Bush said Thursday.

Rep. Barney Frank, D-Mass., a central force behind the legislation, said Friday that recent reports about falling home prices have rallied support for the plan.

But he acknowledged that the plan may not do enough to help homeowners or the housing market. Frank, chairman of the House Financial Services Committee, said that even after a bill like this, "you may need more."

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