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A helping hand

The Baltimore Sun

There's little fine print in President Bush's plan to help Americans with subprime mortgage woes. He's offering a way for overextended borrowers to try and meet their rising mortgage payments and avoid foreclosure. It's about time.

After initially shrugging off the potential fallout of the subprime mess, Mr. Bush has realized that keeping more Americans in their homes is good for the economy and that the federal government has a role to play.

At the center of the president's modest package is a proposed change in the Federal Housing Administration's mortgage insurance program that would enable homeowners struggling with the higher costs of adjustable rate mortgages to refinance with federally insured loans. Homeowners who have missed payments are not now eligible for the program. But Mr. Bush would change the rules to allow a homeowner who faltered only after the mortgage jumped to a higher amount to be eligible for the FHA insurance.

The change could help prevent 80,000 homeowners from defaulting and losing their homes. With the slowdown in housing sales, cities don't need a glut of vacant properties blighting neighborhoods.

Across the country, foreclosures are on the rise. Among the reasons: a proliferation of subprime mortgages, which appealed to buyers with minimal or spotty credit histories because they offered low initial rates that ballooned within two years.

The subprime mess has reverberated through the economy: Interest rates have risen, some mortgages are harder to get, the stock market fell wildly and the financial markets faced a credit crunch. But just two weeks ago, Mr. Bush took a "not to worry" attitude, suggesting the markets would self-correct and subprime borrowers hadn't read "the fine print" on their loans.

While many homeowners foolishly took on more debt than they could handle, it's also true that lenders, brokers and investors looked to cash in on the housing bubble without seriously considering whether borrowers could repay loans.

Maryland's subprime foreclosure rate has been 2.4 percent, compared with 5.1 percent nationally. But consumer advocates project that as many as 45,000 subprime loans that originated in the state will end up in foreclosure. State officials and legislators have begun reviewing a variety of proposals to provide additional relief to homeowners and better police the industry.

The Bush proposals won't bail anyone out of his or her problems, but they will help thousands of homeowners help themselves. And the president's call to enforce predatory lending laws and strengthen lending practices sends the right message to an industry that needs to re-examine its role in the subprime mortgage debacle.

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