Schumer calls for subprime bailout
New York Democrat wants funds to help subprime borrowers.
NEW YORK (Reuters) -- The federal government should offer troubled borrowers hundreds of millions of dollars to bail them out of subprime mortgage loans, several leading Democratic lawmakers said on Wednesday.
"The federal government can send in an infusion of [money] to prevent foreclosure," said Charles Schumer, a New York Democrat.
The cash infusion is needed right away and should go to both help fund community groups aiding troubled borrowers and to directly fund bailouts, Schumer said.
Schumer spoke as chairman of the Joint Economic Committee, a joint committee of Congress, and appeared with Democratic senators Robert Menendez of New Jersey and Sherrod Brown of Ohio.
He said he planned to introduce legislation soon.
According to the Center for Responsible Lending, up to 2.4 million subprime borrowers are in danger of losing their homes to foreclosures over the next couple of years.
The number of properties in some stage of foreclosure has already begun to climb. Nationwide, delinquencies increased to 4.95 percent of all outstanding loans during the last quarter of 2006, up from 4.70 a year earlier, according to the Mortgage Bankers Association.
The impact on foreclosures falls not just on individual borrowers; it can affect entire neighborhoods.
According to Allen Fishbein, director of credit and housing policy at the Consumer Federation of America, recent studies have revealed that even a single foreclosure may reduce values of neighboring properties by about 5 percent.
Boarded-up, foreclosed-on houses can be magnets for crime and a deterrent for home buyers and business investors.