The Foreclosure Report

'Taxpayers Guarantor For Risk': Senator

The political tug-of-war over the hurricane disaster area is coming to a head. "The U.S. Senate Banking Committee's chairman on Wednesday said he does not want a Louisiana proposal for a federal agency to buy up hurricane-destroyed homes to become an unnecessary bailout for mortgage bankers. 'I think we should be very wise, or try to be wise, to making sure that this is a situation that would work,' said Shelby."

"'It would not just be a bailout for some mortgage bankers and banks that have a lot of capital and maybe could absorb some of those losses or foreclosures themselves,' he said. 'That's what capital's about.'"

"Shelby said his committee planned to hold a hearing on Feb. 15 on Louisiana Rep. Richard Baker's plan to create the Louisiana Recovery Corp. with sweeping powers to buy and redevelop tracts of land devastated by the hurricanes, helping property owners in Louisiana avoid defaults on home and business loans."

"'We have to look at what this money would be used for,' Shelby said. 'Despite our compassion for the people we want to help, would this aid and abet building in certain areas that are surely going to flood again?'"

"Shelby also said the federal government's cash-starved flood insurance program, slammed by billions of dollars in Hurricane Katrina claims, needed to be reformed and put onto a sound actuarial footing to better balance the premiums paid by homeowners and actual flood risks and claims."

"This would mean a redefinition of flood-prone coastal areas based on scientific research and data and difficult choices in terms of where to rebuild homes and businesses. Shelby said he did not want the program to continue subsidizing imprudent development in flood-prone areas, such as expensive coastal vacation homes."

"'We're using the taxpayer over and over as guarantor for risk that people should take themselves,' he said."

posted by Ben Jones @ 4:11 PM