By Dina ElBoghdady and Zachary A. Goldfarb
Washington Post Staff Writers
Friday, December 10, 2010; 1:07 AM
The top federal agencies responsible for setting housing policy are clashing over a new program designed to help borrowers whose homes are worth less than they owe on their mortgages, according to industry and government sources.
The Federal Housing Administration says the program could avert foreclosures, but the Federal Housing Finance Agency has concerns that the program, if expanded to include the government-controlled mortgage giants Fannie Mae and Freddie Mac, could be a logistical nightmare that would cost taxpayers too much, the sources said.
About one in four borrowers is underwater. Without equity in their homes, these borrowers tend to be vulnerable to foreclosure because it is difficult for them to refinance or sell their homes. Housing advocates have said that helping these borrowers is important to stem the nation's foreclosure tide.
At issue is an FHA program launched in September that would allow some underwater borrowers who are current on their mortgages to refinance into more-affordable loans with a smaller loan balance and lower interest rate.
The agency, which answers to President Obama, says the program is an intelligent approach to avoid foreclosures among borrowers whose homes have substantially declined in value.
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