Oct. 31 Update: Feds Seek to Stem ForeclosuresThe federal government's plan to help up to 3 million homeowners facing foreclosure is still pending, as the world's stock markets slid in early trading Friday. Asian and European markets were trading down despite the announcement by Japan's central bank that it was cutting its prime interest rate from .05 percent down to .03 percent.
Even with the prospect of the $50 billion in federal aid for homeowners, investors remained cautious, selling off modest numbers and perhaps wanting to forget the past month, which is shaping up to be the worst in the last 21 years.
Federal Reserve chairman Ben Bernanke is expected to speak to a mortgage conference on the mortgage crisis and may press government and lawmakers to look for more ways to give additional relief. If the new program gains approval, it would stop foreclosures by letting lenders reduce delinquent borrowers' mortgage payments to affordable levels. In turn, the government would guarantee some percentage of each loan to backstop lenders if borrowers re-default on modified mortgages. The Federal Deposit Insurance Corp. would oversee the program.
Even more troubling news is that an estimated 7.5 million homeowners are "underwater," meaning they owe more on their mortgages than what the homes are currently valued at, according to a report by First American CoreLogic, a real estate research firm. Another 2 million homeowners are paying mortgages on home that are worth less than 5 percent more than the mortgage being paid.
The proposed deal to combine General Motors Corp and Chrysler hit a wall after government funding for the merger was nixed by the Bush Administration on Thursday. The automobile giants are seeking to merge as they struggle with the economic slump, with auto manufacturers in Asia and Europe are also warning of sharply lower earnings.