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Key U.S. senator proposes company to buy mortgages
WASHINGTON (Reuters) - The chairman of the Senate Banking Committee is working on a plan to set up a company to buy distressed home loans at currently discounted values and help fund new mortgages.
In a letter to Senate Majority Leader Harry Reid released on Wednesday, Sen. Christopher Dodd said he envisioned an entity with an initial capitalization of $10 billion to $20 billion that would buy distressed mortgages and pass on the "discounts ... to homeowners in the form of new, lower-balance mortgages."
Those new mortgages would either be insured by the Federal Housing Administration or backed by Fannie Mae and Freddie Mac, he said, two government-sponsored enterprises which buy mortgages.
"The difference between the old mortgage and the new mortgage would be sufficient, after initial capitalization, to fund the program and cover possible losses," the Connecticut Democrat said in the letter.
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"The new mortgages would be new 30-year fixed-rate mortgages, ensuring long-term stability for homeowners and housing market," he added.
Dodd's proposal is aimed at helping millions of Americans facing the risk of foreclosure.
(Reporting by Patrick Rucker; editing by Gary Crosse)
