A new bank bailout plan unveiled last week may give new hope to the distressed homeowners and communities. Treasury Secretary Tim Geithner announced recently the government's plan to commit more than $ 1 billion in reforms aimed at rescuing the country's financial system. The program could modify the weaknesses in the rescue plan proposed by the Bush administration, and cancel other previous reforms.
Much of the funds would go to finance purchases credit and revive the economy through increased lending activity. The key points of the program include:
Support for bank loans
The Treasury aims to improve the capital position of the major banks to boost lending. This would involve a three-part process:
"Stress Test": The banks and financial institutions will be monitored to ensure they have enough capital to keep lending, and if they can survive future economic downturns. The government will tighten its rules on public disclosure of the holdings of a bank, and those with assets of more than $ 100 billion will be evaluated individually.
Capital Assistance Program ": The CAP will build on previous efforts theTroubled Asset Relief Program (TARP), which has 250 billion U.S. dollars in capital purchases. The Treasury Department will continue to help banks rebuild capital after proof stress, and take preference shares in the banks participating in the CAP program. According to Geithner, this will serve as a buffer for banks may benefit from increased borrowing.
"Financial Stability Trust ': The FST is an independent trust to hold investments by the Treasury under the program, and will be maintained by a group of fund managers.
The purchase of distressed assets
This section is designed to help relieve the banks of "toxic" or difficult to sell assets and put more of its efforts on private loans. The goal is to buy these assets using a combination of public and private capital, with the private sector take over the price evaluations. The expenses for this purpose are still uncertain, but the Treasury expects to generate up to $ 1 trillion from investments.
Consumer and business lending
The Treasury also plans to restore the flow of credit by increasing consumer lending and business levels. This objective is based on the proposed bond Deadline Loan Securitization Facility (TALF), but increase the funding of U.S. $ 200 million to U.S. $ 1 billion in federal loans. Under the plan, the government buy securities backed by consumer loans and commercial loans such as car loans, small business and credit cards. The plan was put a premium on higher quality securities to minimize losses to taxpayers.
Improving transparency and accountability
Banks and financial institutions benefiting from taxpayer dollars will be closely watched to make sure they do not misuse public funds. Some of companies receiving bailout funds must meet the new requirements and operate under tighter restrictions. For example, they must submit a plan for spending of government assistance to raise loans, and charge monthly reports on www.financialstability.gov site web. Details of all transactions will also be posted on the website of 5-10 days after each one.
Companies receiving federal loans also have to limit dividend to 1% per quarter until pay the debt. Until then, it can buy back the private equity or buy other banks without the consent of the Treasury. The PAC also be imposed on executive pay for executives, and lobbyists will be prohibited to avoid influencing the decisions of the Treasury.
The housing and foreclosure assistance
The new plan will reduce interest rates to provide more affordable housing and reduce the risk of foreclosure. This program will cost of $ 50 billion in the first weeks after application, during which loan modification guidelines will be established and existing programs be adjusted. Under this plan, all companies that receive financial assistance must participate in the mitigation plan exclusion (currently, only Citigroup and Bank of America are taking part).
For homeowners, the government plans to spend $ 600 billion to buy mortgage-backed securities existing Fannie Mae and Freddie Mac This will enable them to reduce mortgage rates and make housing more affordable for families in poor communities.
Loans to small companies
Small businesses and lenders in the community also benefit from the rescue plan through lower borrowing costs and increased lending. Key elements include the purchase of loans from the Small Business Administration (SBA), the reduction of fees, and guarantees of loans increased to 90%.
Loan modification options
The new bailout plan may offer new options for owners seeking loan modification and other forms of mortgage assistance. Fortunately, most companies Loan modification programs have been adjusted to better comply with government policies. To learn more about your options under this rescue plan, visit: http://www.cdloanmod.com/loss-mitigation-news
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