President Bush outlined administrative changes to deal with the subprime-mortgage crisis in a planned speech late Friday morning. The policies target low to middle income Americans who cannot afford their mortgage payments. He noted the crisis will "take more time to fully play out," but "as it does, America's overall economy will remain strong enough to weather any turbulence." Bush touched on a change to allow the Federal Housing Administration to guarantee loans for delinquent borrowers. It is meant to help owners who are at least 90 days behind in their payments but still live in their homes. The FHA estimates the move will help an additional 80,000 homeowners qualify for refinancing next year. He will also ask Congress to temporarily shelve an IRS provision which penalizes borrowers who refinance their loans to reduce their sizes or who lose their homes due to foreclosure. In addition, with more than two million loans projected to reset at higher rates over the next two years, Bush will push an initiative to spot people who are in danger of defaulting and work with lenders to create a more accommodating loan for the borrowers. The president, like Fed Chairman Ben Barnanke, was not looking to bail out companies in the mortgage industry. "The government's got a role to play. But it is limited. A federal bailout of lenders would only encourage a recurrence of the problem," Bush explained. Democrats have accused Bush of being insensitive to the struggles of poorer Americans. Though this is perhaps the first step in solving those problems, analysts are not convinced it will have an immediate impact. "I don't think he's outlining a rescue plan. This is more messaging. It's more pomp," noted Richard Steinberg, president of Steinberg Global Asset Management. The FHA does have strict policies on the size of loans it can back and backgrounds of the borrowers, which will only allow the program to help a small portion of homeowners. Perhaps in an effort to reach more borrowers, Treasury Secretary Henry Paulson has begun working with mortgage leaders Fannie Mae and Freddie Mac to develop loans for those will face default if they are unable to get more favorable terms.
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