More modest proposals are being offered, including Friday's proposals by President Bush. He called for allowing borrowers at least 90 days past due to refinance into programs insured by the Federal Housing Administration. The move follows Bush's previous attempt to get Congress to eliminate the FHA's required 3 percent down payment and raise the size of the loans the agency can insure to as much as $417,000 from $362,790. Bush also called for a temporary tax break for troubled borrowers who refinance for less money than they owe and for people who lose their home to foreclosure. Economists and other experts say expansion of FHA is a reasonable plan, although it will have a limited effect on pricey markets like Orange County, where the median home price is $640,000.
Raphael Bostic, associate director of USC's Lusk Center for Real Estate, said that unlike the imaginary taxpayer fund of Gross, an FHA expansion wouldn't hit taxpayers as hard. He said loan losses are covered by insurance. Bostic said it's unclear by how much insurance premiums could spike.
"At this stage, it really is a proposal," he said.