The Obama Administration Unveils New Mortgage Help

The two companies will package mortgages made by the housing agencies and sell them as bonds to the Treasury Department. At issue is the fact that financial institutions are still hesitant to lend. The new program, the Obama Administration hopes, will help state and local housing finance agencies provide hundreds of thousands of affordable mortgages.

The program is described as temporary in a press release by the Treasury Department, the Department of Housing and Urban Development and the Federal Housing Finance Agency. Additionally, Michael Barr, an assistant treasury secretary said that "The expected cost to the federal government is zero." Any losses from loan defaults will be covered by fees from by the state agencies.

Since the beginning of the mortgage crisis, and the global recession that followed, financial institutions have been reluctant to lend to consumers. Some have said that with the fallout from the recession, large banks, feeling that they have now weathered the storm, but realizing also that financial regulations have not been put into place further restriction them, are taking chances, but not with loans.

Treasury Secretary Timothy Geithner said, "This initiative is critical to helping working families maintain access to affordable rental housing and homeownership in tough economic times. Through this initiative, the administration aims to help (the housing finance agencies) jump-start new lending to borrowers who might not otherwise be served and to better support the financing costs of their current programs — key components in stabilizing the housing market overall."