ALAN WIRZBICKI'S article on the foreclosure bill ("Emergency mortgage aid bogged down," Page A1) contains two important omissions that result in a misleading picture. He writes that legislation "would help lenders . . . by allowing them to transfer the distressed loans to the federal government, avoiding potentially huge losses if borrowers continue to default on their mortgages." He omits that for lenders even to be eligible for consideration in this program, they must first reduce the amount that they are owed by 20 to 30 percent.
Second, even after the loan reduction has been made, contrary to the article's assertion, the federal government will not accept those loans in which the borrower is likely to default. The bill allows but does not require the Federal Housing Administration to issue mortgage insurance only after the loan has been written down and the FHA is satisfied that the borrower can repay at that amount. This does offer some inducement to the lenders to write down the loans, but it is hardly the blanket assumption of distressed mortgages that the article describes.
In addition, the House includes a provision that protects state and city rules governing the foreclosure process and the obligation to maintain foreclosed property from being cancelled by national bank regulators. This is further inducement to the lenders to participate in the program.
BARNEY FRANK
Chairman
House Financial Services Committee
Washington 
