A few days ago I blogged about the Fed Chief's ideas to help out the mortgage mess.   The Fed Chief Chimes in On A Cure For the Mortgage Mess - Higher FHA Loan Limits is a Great Place to Start

Today, the Commander in Chief has chimed in.  George W came out and outlined some ideas that will help troubled home owners avoid foreclosure. 

It wasn't a full blown bail out, by any means.  It was basically an affirmation of what Bernanke had suggested a few days ago. Regardless, its still more good news.

Not to get too political but in 2000, I, like the majority of Americans who voted, did not vote for W.  However, after 9/11, I, like most Americans were happy we had him as our leader. 

What a lot of us liked about him then was that he seemed to get us.  He seemed to be one of us and that he would lead us with his heart.  

Many of us believed he would be somewhat of a bipartisan President, willing to listen to both sides, and then do what he felt was right, and make it his own, like we had heard he had done as Governor of Texas.

Regardless of what has transpired since then and no matter what you think of him today, what he did today is show us all a glimpse of what a lot of us have always liked about him and what we expected from him from Day One.    

The proposals he made today were mostly those that Democrats have been making of late, but he was able to deliver it with passion and understanding in a bipartisan way, and show us that he is still the man in charge.

Bush said "It's not the government's job to bail out speculators or those who made the decision to buy a home they knew they could never afford.  Yet there are many American homeowners who could get through this difficult time with a little flexibility from their lenders or a little help from their government."

There are 2 million ARMs that are going to adjust in the next year.  These measures are being taken with an eye on those. 

Bush said that there will be a new program launched very soon called FHA Secure. 

FHA Secure will be a program that will let homeowners who have good credit but can't afford their current mortgage payments to refinance into mortgages insured by the FHA.

Bush also urged Congress to get the FHA loan limits raised but he also is pledging to get the tax code revised to make it easier for banks to forgive some your loan to make it easier to refinance.

For example, let's say you owe $300,000 on your home but you owe $320,000.   Your ARM is adjusting and you simply can't afford the new payment.  

Today you can't refinance because you are upside down.  Now let's say you let the bank know you will have to go into foreclosure if it adjusts.  Recently banks have hired thousands of people to counsel you and one of the solutions is note modification where they can change the terms of your mortgage.

OK, so let's say the bank decides to modify your Note, forgiving the $20,000 you are upside down so you can refinance and save your home.   Today, you would be taxed $20,000 at the end of the year because this forgiveness is like income.    Bush's pledge today will change that.  You will not be taxed on forgiveness.   

Bush said, "When your home is losing value and your family is under financial stress, the last thing you need to do is to be hit with higher taxes."

Bush also said the administration would launch a new foreclosure avoidance initiative to help homeowners figure out a way to refinance and they will work closely with groups that already offer counseling on foreclosure and refinance assistance.

He also said that measures will be put in place for the future to make the mortgage process more reliable and fair to reduce the likelihood of these lending problems happening again.   In other words, more regulation of mortgage brokers and bankers.

At the end of the day, this is what we will see: increased FHA loan limits, reducing down payment requirements on FHA loans, and eliminating tax liabilities for foreclosure victims.

There have already been negative comments on this.  Some argue this is too little, too late.  That this will help less than 250,000 while millions are in danger.   

I disagree.  This may only help 250,000 families but this is a colossal mess and every little bit helps. 

Combine this with the fact that the banks have hired thousands of note modification staffers and I believe the mess we were facing has potentially been reduced substantially.

You also can be certain that Fannie and Freddie will also be jumping in soon with their revisions to help.

This is not only great news for mortgage lenders as it means we can now help some people we havent been able to help before but this is incredible news for real estate professionals. 

Higher FHA loan limits, combined with their less-credit sensitive guidelines, and the removal of the 3% down payment requirement creates new business in the marketplace for us all.  FHA Loans are Back and Just In Time--What You Need To Know About Them

The financial markets have rallied today on the words of Bernanke and Bush.  

Regardless of what you believe the government's role is in all of this, it gives most of us a little more comfort when we know our leaders are watching closely, they have ideas that they believe will help, and they are willing to push for the implementation of those ideas.

I feel much better at the end of this week about the mortgage crisis than I did last week and you should too.  It feels like it's quite possible that the worst may actually be behind us.

UPDATE:  After I wrote this today, FHA released an announcement about the FHASecure Plan.  It says...

To qualify for FHASecure, eligible homeowners must meet the following five criteria:

1. A history of on-time mortgage payments before the borrower's teaser rates expired and loans reset;
2. Interest rates must have or will reset between June 2005 and December 2009;
3. Three percent cash or equity in the home;
4. A sustained history of employment; and
5. Sufficient income to make the mortgage payment.

In addition, FHA will implement risk-based premiums that match the borrower's credit profile with the insurance premium they pay-i.e., riskier borrowers pay more. This common-sense, risk-based pricing structure will begin on January 1, 2008.

"FHASecure will bring stability to the housing market and give eligible families who were in good financial standing before their loans reset a chance to keep their homes."

The combination of FHASecure and risk-based premium pricing will permit FHA to return to the role it was originally designed to play, bringing stability to the real estate market by helping break today's cycle of foreclosures and price depreciation and creating much needed liquidity in the now-constricted mortgage market.

As many as 240,000 families or more will be helped by this new plan.