FreedomWorks is Alarmed CBO Scoring Shows Dodd-Frank Bill Rescues Banks, Not Borrowers

Business Wire, June 16, 2008

Congressional Budget Office Estimates 35 Percent of Dodd-Frank Bailout Loans Will Still Default

WASHINGTON -- The Congressional Budget Office (CBO) released its scoring of the Dodd-Frank housing bailing last week. Among its projections: a stunning 35 percent of the loans refinanced through the program will eventually default anyway, and that banks will use the program to offload their "highest-risk loans" to the taxpayer.

The CBO wrote that it:

"...the cumulative claims rate (default) for the program would be about 35 percent and that recoveries on defaulted mortgages would be about 60 percent of the outstanding loan amount. Those rates reflect CBO's view that mortgage holders would have an incentive to direct their highest-risk loans to the program, and are based on the expectation that the underwriting standards established for the new program would be less restrictive than those currently in place for FHA's single-family loan guarantee program, thereby allowing FHA to insure loans with a greater risk of default."

http://www.cbo.gov/ftpdocs/93xx/doc9366/Senate_Housing.pdf (Page 10)

FreedomWorks Chairman Dick Armey commented:

"The CBO estimate reveals who is really benefiting from the Dodd-Frank approach. Large mortgage lenders like Countrywide Financial get to reappraise and then send 100 percent of the liability to the Federal Housing Administration (FHA). Dodd-Frank guts FHA lending standards and makes shaky mortgages a new multi-billion problem for taxpayers, while rewarding reckless lenders."

"This bill is the wrong approach and actually undermines affordable housing because it jeopardizes the solvency of the FHA."