LOS ANGELES AND WASHINGTON — The Obama administration is promising an aggressive fight against the rising tide of home foreclosures, but officials have yet to decide what strategy -- or combination of strategies -- they will use.
Among the possibilities being pushed by various interest groups are a six-month foreclosure moratorium, a doubling of the mortgage interest deduction, a tax credit for those who buy homes and a federally sponsored mortgage refinancing program.
But it's been two years since foreclosures began to mount. And government and the financial industry have been unable to agree on a plan largely because they cannot resolve a central issue: How should losses be divided between borrowers and lenders?
Treasury Secretary nominee Timothy Geithner said last week that the administration was still wrestling with proposals and did not expect to finalize plans for several weeks.
Meanwhile, business and housing experts as well as congressional leaders have been eagerly pushing their suggestions.
The challenge for the White House will be crafting a foreclosure prevention package that promotes refinancings without unfairly benefiting irresponsible borrowers or lenders.
Last week, Lawrence H. Summers, the former Treasury secretary who is Obama's pick to direct the National Economic Council, wrote a letter to congressional leaders stating the administration would commit $50 billion to $100 billion "to a sweeping effort to address the foreclosure crisis."
The fine print of the letter, however, indicates that the administration does not plan to help everyone with mortgage trouble. It specifies that "preventable foreclosures" will be targeted and states that aid will go to "economically stressed but responsible homeowners." Just how the administration will separate those worthy of assistance from the lost causes is among the details yet to be determined.
"They're just getting started," said Steven Adamske, spokesman for the House Financial Services Committee. It's too early to know, he said, what foreclosure relief measures may emerge as law.
UC Berkeley economist Kenneth Rosen met with the Treasury Department's transition team this month to present his ideas for addressing the housing crisis.
Rosen presented a plan to declare a six-month foreclosure moratorium during which officials could figure out criteria for determining which mortgages could be saved and which couldn't. For worthy borrowers, he favors government-sponsored mortgage refinancing at an interest rate of 4.5%. To encourage home purchases, he proposes a tax credit for those who buy homes this year.
