Wampum

Eric can attest to my ranting and raving over how ineffective Bush's "subprime refinancing" plan would be when he unveiled it last fall. Of course I was right:

Feb. 1 (Bloomberg) -- President George W. Bush's proposal to help 1 million subprime borrowers avoid foreclosure with tax- exempt bonds has an obstacle: states don't want the risk any more than private lenders do.

The state housing agencies that are already offering mortgage refinancing options are turning away so many applicants that they've had no need to raise funds. Since New York said it would commit $100 million in July, three of the 500 loans envisioned have been made. Massachusetts extended four loans under a $250 million program started in August, and Ohio made just 36 of the thousands anticipated by Governor Ted Strickland.

The reluctance to lend threatens to undermine a pivotal part of the president's plan for alleviating the worst housing slump in 26 years. More than 50 percent of subprime borrowers are being rejected by state programs because their homes have lost too much value or they've accumulated excessive debt, estimates Geoffrey Cooper, emerging markets director at a unit of MGIC Investment Co., the country's biggest mortgage insurer.

"These things are basically public relations gimmicks,'" said Bruce Marks, chief executive officer of Neighborhood Assistance Corp. of America. The Boston-based nonprofit organization negotiated an agreement with Countrywide Financial Corp., the biggest U.S. home lender, in October to modify rates and terms on $16 billion of subprime mortgages to prevent foreclosures.