The Obama administration should buy problem mortgages from investors at a discount to facilitate the restructuring of these loans, Barney Frank, the chairman of the House financial services committee, has told the Financial Times.
Frank wants Barack Obama’s team to set aside $40bn-$100bn (€30bn-€76bn, £27bn-£69bn) from the second tranche of the troubled asset relief programme to finance antiforeclosure efforts, and said the money to fund a mortgage purchase scheme could come out of that sum.
He also wants the Obama administration to provide subsidies for cash-flow relief to overstretched borrowers and for an existing programme to restructure and refinance loans worth more than the value of the underlying home.
In an interview, Frank told the FT that buying mortgages in order to restructure them was a 'twofer' – a policy that accomplishes two goals at the same time.
'It reduces foreclosures and gets rid of some of the toxic assets' that are clogging up bank balance sheets and deterring them from lending.