Ed Perlmutter: “Well, we've taken steps to stem foreclosures by using the FHA guarantee as a way to slow things. And the way it works is…”

“Well, we've taken steps to stem foreclosures by using the FHA guarantee as a way to slow things. And the way it works is that a bank that has a loan to somebody can write the loan down to whatever the market value is. Then the FHA will guarantee 90 percent of this lower amount for the borrower so long as the borrower can pay that 90 percent back. Now they have to go through a credit check, and they've got to be able to pay the lower amount. So the Federal Government is coming in to stop a foreclosure which, if it takes place, could result in a vacant home that then ends up decaying, and it starts the decay in a neighborhood. So it assists the neighborhood. It allows the bank to become liquid. And it gives the borrower a chance to make the payments at this lower amount. Now, if the borrower were to sell in, I believe, within 5 years, the Federal Government would receive a portion of anything above the written down purchase price. But the bottom line is, in a very prudent and fiscally responsible manner, FHA is being used to guarantee lower loans, reduced loans so that we can limit the numbers of foreclosures in our neighborhoods and maintain the strength of our neighborhoods.”