We have spent $178 billion in taxpayer money to buy nonvoting shares in banks, including $45 billion just for Citigroup stock. Taxpayers will be on the hook for many billions more with federal loan guarantees for $300 billion in mortgage-backed securities and other "troubled assets" held by Citigroup.

It is time to spend some of that bailout money on homeowners and neighborhoods. A program proposed on Nov. 13 by the FDIC could keep 1.5 million homes out of between now and the end of 2009, at a cost to taxpayers of $24.4 billion. Think about it — 1.5 million families that aren't forced to move; 1.5 million houses that don't sit empty, drawing vandalism; 1.5 million houses that don't go on the real estate market, further depressing real estate prices for all homeowners.

For a cost of just over half the amount of taxpayer money being spent on Citigroup shares, we could stop 1.5 million foreclosures. Let's get on with it.

The modification program would work like this:

The servicer would have to agree to participate. Participation in "voluntary" programs has been very weak so far, but this program may get better participation because it is designed to improve outcomes for all parties — the servicer, investors, and homeowners.

The servicer would review all its seriously past-due home mortgages for owner-occupied homes and determine how much money would be lost in foreclosure for each loan. For each loan, the servicer would compare the amount the lender or investors would lose in a foreclosure to the cost to modify the loan to reduce the payment to no more than 31% of the borrower's household income.

Homeowners would get an offer to modify the loan where the amount that the lender or investors would lose by modifying the loan is less than the probable loss in foreclosure. The FDIC estimates that this would be about half of the mortgages that are going to be in trouble by the end of 2009.

After the homeowner makes six monthly payments on the new loan, investors and the government would share any future loss on the modified loan for the first eight years of the life of the modified loan.

Everyone could benefit from this proposal. Many families could stay in their homes. Neighbors would benefit because there would be fewer empty houses that could further depress real estate prices. The cost to lenders and investors to modify loans would be no more than they would have lost anyway in foreclosure. Investors would replace a problem loan with one that is up to one-half guaranteed by the taxpayer for its first eight years.

This program would cost less than 15% of what we've already committed as taxpayers to buy bank stock, and less than 4% of the total of authorized bailout money.

The new program would still be voluntary for lenders, which is a key reason why Consumers Union and many other consumer housing, labor, and civil rights groups also support giving courts the ability to make adjustments in home mortgages in individual cases.

We have a clear choice now between spending less than 4% of the already-authorized bailout money to stop avoidable foreclosures or waiting around until those empty houses harm our neighbors, our neighborhoods, and our local tax bases. The proposal by the FDIC to spend just a fraction of the bailout money on this sensible new program is the smart choice. The Treasury Department should direct bailout funds to this program now. If Henry Paulson fails to do so, then Timothy Geithner, President-elect Obama's incoming Treasury secretary, should give homeowners real hope for the holidays by telling the public that he will get this done when he takes office.

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