Senator Chris Dodd proposes setting up a fund that would buy defaulting subprime mortgages and restructure loans for borrowers.
A proposal to bail out subprime mortgage borrowers who are at risk of foreclosure was floated at a Senate Banking Committee hearing Thursday.
Senator Chris Dodd, the committee chair, said he is working to create a Home Ownership Preservation Corporation, which would purchase mortgage securities that are backed by at-risk, subprime loans from lenders and investors.
This corporation would give these lenders and investors a better price for the securities than they would get if the properties backing them were put through foreclosure.
Additionally the loans on these properties would be restructured so that borrowers could afford the new payments and remain in their homes.
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