ARTICLES MODERN

After pouring vast amounts of money in financial institutions of almost every type, and having little to show it, the Bush administration and Federal Reserve are suddenly taking a new look at the ordinary and colleagues.

Ben S. Bernanke, chairman of the Federal Reserve, warned on Thursday that the flight number Foreclosures threaten the economy. He then proposed some ideas - a government loan with engineering changes, and more taxpayer money to help people Refinance - to keep people in their homes.
“In the case of public policies to reduce preventable Foreclosures not rely solely on a desire to help people who are in trouble,” said Mr Bernanke. “More must be done.”
At the Treasury Department, meanwhile, top officials continued to work on a plan to bolster the housing market by subsidizing 30 years of home mortgages with rates as low as 4.5 percent - a level of home buyers who have not seen from the beginning of 1960.
Both actions underlined how economic policy makers have reached almost full circle. From the financial crisis began last summer, the Fed and Treasury have focused almost exclusively on the patched up the financial system - propping up banks, firms on Wall Street, money market funds and issuers of commercial debt.

But the new focus on helping individuals could create a bitter split between those who want to buy houses and those who already own them. It has already opened a rift between the real estate industry, which wants to increase sales, and the banking sector, which wants to exit from the staggering volume of troubled mortgages.

In accordance with a plan that top Treasury officials are weighing, the Treasury Department will sign the tens of billions of dollars worth of 30-year fixed rate mortgage-rate much lower than most Americans have ever seen .

According to Bankrate.com, 30-year fixed rate mortgages has fallen on Thursday to 5.58 percent, down from 5.76 percent last week. 10 years fell from Treasury note 2.55 percent late Thursday, a new low.

But the cheap mortgages would be available only for purchase of houses for people, not the roughly 50 million families who already have mortgages and would like to Refinance at a lower rate.

As a result, the plan does not provide direct relief to millions of people who are facing foreclosure because they have taken in exotic mortgages that they could not afford. Nor would offer no plan for the benefit of persons who have remained current on their mortgages simply and would be interested in taking advantage of a lower rate. As provided by Treasury officials and colleagues who now pay 6 percent would be watching November neighbors whose reach monthly payments were almost one third lower.

“At this point, our view is that such a program can do more harm than good,” said Camden R. Fine, president of the Independent Community Bankers of America, which represents approximately 8000 small banks.

“You have thousands of banks that made loans and have them sitting on their books, and whose borrowers have worked their rear ends off to make payments,” he said. “These people are going to go to their banks and tell them they are a neighbor only loan at 4.5 percent, while banks will not be able to help. They are going to have extremely angry and the disgruntled clients. ”

But the National Association of Realtors, whose members want to bolster home sales, is lobbying hard for the idea.

“We believe that the only way to really address the housing is to increase sales,” said Lawrence Yun, chief economist of the association. “Home prices will not stabilize until we address the inventory issue, and the only way to bring down the inventory of homes on the market is to bring a new set of buyers. We think this would do the trick.”

Mr. Yun estimated that one year, to give the home buyers with an interest rate of 4.5 percent would cost the government about 50 billion $. This would result, he predicted, in about 500,000 home sales - an increase of slightly more than 10 percent over today’s rate of depressed sales. If the program was extended to people who simply wanted to Refinance, Mr. Yun warned, the government’s cost could easily be 10 times higher.

Neelie T. Kashkari, assistant secretary of treasury, which is supervising the $ 700 billion bailout plan, publicly confirmed Thursday that mortgage loan plan has been considered, but did not provide other details.

People familiar with the discussions said Treasury officials were still debating the exact funding mechanism to cheap mortgages. The main idea is to allow Fannie Mae and Freddie Mac, the government-controlled mortgage-finance companies to buy up and guarantee 30-year fixed rate mortgage-paying 4.5 percent interest.

The Treasury will give the money to purchase mortgage from Fannie and Freddie.

The plan closely resembles a proposal developed by Christopher J. Mayer, vice dean of Columbia Business School.

“This is really an opportunity to life,” he said. “If someone ask if this is the time to come into the market, I think someone would have bought a house in 2007 and was sitting on the edge, or who want to buy this year or would buy in 2010, would like to to take advantage of this. ”

Mr. Mayer said long-term Treasury rates are so low now that the government could make a profit, in fact, on the cheap loans. Treasury can sell bonds for 10 years now and pay only 2.7 percent per year, far below the 4.5 percent it would be charging home buyers.

But he said his preference was to make available to existing mortgages and colleges, and home buyers.

“I think there are additional benefits, we could have the extension program Refinance people,” said Mr. Mayer. “At 4.5 percent, you might be looking at 25 million people who could Refinance savings and the environment could be $ 400 to $ 500 per month.”

In the past, Treasury and often fed invoked officials rescues on Wall Street have been crucial for the welfare of Main Street. But the new idea would be the Treasury to help direct Main Street.

At the same time, Mr. Bernanke, but reversed the rhetoric of recent months, arguing that helps colleges and avoid foreclosure has been critical for the entire economy.

“Steps to stabilize the housing market will help stabilize the economy, too,” said Mr Bernanke. “Reducing preventable Foreclosures would not only help families stay in their homes, would give much broader benefits.”

Mr. Bernanke, speaking at a conference on housing federal agent, said Bolder proposals for government action. He suggested that subsidize lower taxes and treasury interest rates on a new program, Hope for colleges, which is intended to help troubled and colleagues at Refinance rates much lower. Currently, lenders pay an upfront premium of 3 percent of the loan and the borrowers face high enough interest rate of 8 percent.

Mr. Bernanke also supported a proposal by Sheila C. Bair, chairman of the Federal Deposit Insurance Corporation, to have the government to engineer as many changes 1.5 million loan. Treasury and the White House have fought the idea for months.

Finally, Mr. Bernanke has proposed that the government shares the cost when a mortgage servicer reduce a borrower to pay monthly. Preventing Foreclosures, he said, “should be high on the agenda.”