A package, sponsored by Barney Frank (House Financial Service Chairman from Massachusetts) is being presented in the White House on Wednesday, which would allow the FHA (Federal Housing Admin.) to back about $300 billion in new loans during a 4 year period in return for the lenders agreeing to reduce the mortgage principal. This bill could help homeowners who are facing foreclosure. However, the Republicans are opposed to this and the White House has threatened to veto it as they feel it could only amount to helping out the borrowers, lenders, and investors, without really fixing any current problems or making a long term preventative.

Some bill elements have been drafted to try and sway more Republican support, such as having more surveillance of Fannie Mae and Freddie Mac.

In order to qualify, lenders would have to cut debt to no more then 85% of the appraised value of the home. If any of these FHA refinance loans reached default, the FHA would then have to pay the lender for the remaining principal owned.

The Congressional Budget Office has alleged that the bill could insure over 500,000 borrowers, thus costing over $2.7 billion during a 5 year period, at about a $1.7 billion cost to taxpayers. Over 1.4 million loans are possibly eligible for the program if it is enacted.