Fixing foreclosures

Now this makes eminently good sense. FDIC chief Sheila Blair understood the contours of the disaster sooner than anyone else in the Federal Government and she's shown more creativity than most.

The FDIC said its plan would cost the government about $24.4 billion, which could be paid from the TARP. Most of the money from an initial disbursement in that program has been injected as capital into banks.

FDIC Chairman Sheila Bair, who spent weeks unsuccessfully lobbying Bush administration officials for the plan, issued the proposal two days after Paulson publicly dismissed the idea.

Leading Democratic lawmakers have rallied behind Bair, a Republican, and have even pushed for her to have a place in Democratic president-elect Barack Obama's administration.

Senate Banking Chairman Chris Dodd, a Connecticut Democrat, said on Wednesday that he hopes Paulson works with Bair to get the program up and running as soon as possible to address the worst housing crash since the Great Depression.

The FDIC pushed forward with its plan, posting it on the agency's Web site on Friday morning (http://www.fdic.gov/consumers/loans/loanmod/index.html).

"Although foreclosures are costly to lenders, borrowers and communities, the pace of loan modifications continues to be extremely slow," the FDIC said. "It is imperative to provide incentives to achieve a sufficient scale in loan modifications to stem the reductions in housing prices and rising foreclosures."

The FDIC, which insures most U.S. bank deposits, said it plans to overcome the problem of reaching borrowers, which has dogged previous efforts, by offering mortgage servicers $1,000 to cover expenses for each loan modified. It said the plan could modify about 2.2 million mortgage loans and promised to share up to 50 percent of losses incurred if a borrower defaults on a loan that has been restructured.