Foreclosures For Sale, News, Articles And Foreclosure Information

Treasury Secretary Henry Paulson has announced that his agency has repositioned the focus of his $700-billion Troubled Asset Recovery Program (TARP) from buying foreclosed properties to increasing the capital of mortgage banks.

Paulson reiterated that the objectives of TARP have not changed. TARP was launched to stimulate lending and to help stabilize the financial sector. But, he said, as the economic downturn continues to worsen, his department decided that direct infusion of capital into the financial sector is a better and faster way to stimulate the economy.

He also said that he has evaluated various proposals aimed at preventing foreclosures and has determined that mortgage loan modifications were too complicated to implement. He has however received commitment from Fannie Mae and Freddie Mac in the implementation of a scheme that would reduce foreclosures. He also cited the Federal Deposit Insurance Corporation’s proposed loan modification methods applied by IndyMac as a model for foreclosure prevention efforts.

Paulson said that he has not yet set a date for asking Congress for the release of the other half of the $700 billion TARP funding. He reasserted that the approved $700 billion would be adequate for the current program.

Economic analysts say that Paulson’s explanations about the TARP funds show that the department has been going through difficulties in determining the right steps to reverse the economic downturn and start recovery. His response to a question on the troubles of the country’s Big Three auto manufacturers is also indefinite.

As Paulson was talking with the media, the Dow index was down over 250 points and the spreads on investment grade and speculative debt have contracted only a fraction of five-year highs on November 4. These indicate that investors have not been reassured by various initiatives which have already been launched by the federal government to stimulate the financial sector.

Paulson’s explanations also indicate that troubled homeowners will have to come to terms with the current programs to avoid foreclosures.