Debt Consolidation

Home Loans
Homeowners buckling under their mortgage payments would be allowed to refinance into more affordable government-backed loans under a proposal introduced by a House committee chairman.
The measure by Rep. Barney Frank, D-Mass., calls for the Federal Housing Administration (FHA) to insure $300 billion in new mortgages for distressed borrowers, even if they are badly behind on their payments and have poor credit — including those who owe more than their homes are worth.
HELP FOR STUDENTS
Home Equity
The House backed a measure aimed at ensuring that students get college loans amid the turmoil in the credit markets.
Passage of the bill on a 383-27 vote comes as worries mount that the tightening credit markets, stemming from the subprime mortgage crisis, could limit financial aid for students.
HARRISBURG, Pa. (AP) – States, cities, hospitals and major public agencies battered by wild interest rate swings in one sector of the municipal bond market are scrambling to refinance the debt as they add up the damages to their budgets and nurse some hard feelings.
Refinancing Loans
The highest-profile fallout so far is the tightening of the student-loan market, including the suspension of new student loans by agencies in Pennsylvania, Iowa and Michigan.
There are also fewer bond insurers whose backing is worth the money, after most were downgraded because of growing losses in mortgage-backed securities.
‘A year ago, we could have issued debt without a problem in a number of different markets,’ said Tim Guenther, the chief financial officer of Pennsylvania’s student-loan agency, the second-biggest issuer of auction-rate debt this decade. For more than 20 years, investment banks promised government and nonprofit agencies they could save money by selling auction-rate bonds. Those securities had terms of up to 30 years, but since the interest paid on them was reset at auctions every 7, 28 or 35 days, investors treated them like short-term debt and the rates paid by issuers were lower than if they sold plain-vanilla long-term bonds.
As the crunch intensified, investment banks also starting backing away from their promise to buy at auctions the bonds that no one else wanted. That caused many auctions to technically fail, triggering requirements that called for higher interest rates for a day or longer — the Pennsylvania Housing Finance Agency paid 25 percent at one point — and prompting a rush to refinance into fixed-rate bonds or bank-backed variable-rate bonds.
While officials from states, cities, public authorities and nonprofit hospitals say they intend to get out of the auction-rate market even if it takes all year, the demand for safer securities has left at least one analyst concerned that lenders are in too short supply.
To help, Fabian suggested that temporary credit relief be allowed from home-loan banks — a system of 12 quasi-public regional banks created during the Depression to ensure a stable source of funds for residential mortgages.
It would change federal law to allow thousands of banks to guarantee tax-exempt municipal bonds. The Children’s Hospital of Philadelphia took out a short-term $170 million bridge loan to escape the auction-rate market more quickly.
In some cases, refinancing costs may be higher than the extra interest rate payments.
Increasingly, a bigger syndicate of banks is necessary to back a new bond issue. ‘Every other issuer with auction-rate securities is doing what we are.’
The Houston city controller’s office cited $15 million in increased costs. Amid the scramble, officials have stressed the larger savings their agencies and institutions realized over the years, but also raised questions about how transparent the auction-rate market was, or how well-regulated the insurers were.

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