The steps to be implemented by President Bush to assist those with adjustable mortgages will not touch the broad based problem of those who are threatened by foreclosures. Only 80,000 additional people will become eligible for assistance bringing to 240,000 to total number who will benefit from FHA insurance, and assistance in negotiating easier terms with their lenders.
Then only those who were meeting their payments before their adjustable loan rates reset will benefit. This response is simply not enough.
The new tax benefit to be provided under the proposed Bush plan should be a permanent change in the tax law. Under this tax change, whenever the homeowner is able to negotiate a reduction in his or her mortgage amount the reduction, or amount forgiven by the lender, will not be considered taxable income. Under current tax laws if a homeowner sells their house below the existing mortgage value( a "short sale") or negotiates a reduction in the mortgage value he or she ends up paying an income tax as ordinary income on the reduction in mortgage amount thereby adding insult and additional pecuniary harm to injury.
I am not proposing a bail out, and this is not a bail out proposal being offered by the President. But I am for deeper and broader relief to those who are in or are going to have to go into foreclosure. An additional 80,000 in relief is simply not enough people.