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What Took So Long? Finally, Some Help For Homeowners

By John Nichols, The Nation. Posted February 19, 2009.


The plan could help nine million families struggling to keep their heads above water. But is it too little, too late?

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More than four months after the federal government claimed it was moving to address a mortgage crisis that threatened to take away the homes of millions of American families, steps are being taken to do just that.

All that was required was the exit of a president (George Bush) and a treasury secretary (Hank Paulson) who, in the best interpretation, were too economically inept to do what was needed, and, in the worst interpretation, used the crisis to steer hundreds of billions of dollars into the accounts of their buddies on Wall Street.

Whatever the cause of the delay, President Obama on Wednesday offered the response that was needed -- or, at the very least, a piece of the response that was needed.

The president proposes to take administrative actions to spend $75 billion of the Financial Stabilization Fund on facilitating modifications in existing loans and he wants to require lenders that are accepting tax dollars to adopt foreclosure prevention protocols to prevent unnecessary foreclosures.

These are meaningful steps.

Indeed, ACORN (Association of Community Organizations for Reform Now), the national organization that has been in the forefront of the struggle to keep working families in their homes -- and has taken a lot of hard hits in the media and Washington for doing so -- refers to Obama's move of Wednesday as "the first federal effort to fight foreclosures since the crisis that brought down the economy began two years ago."

The president's ambitious plan could help as many as nine million American families that are currently struggling to make mortgage payments or whose homes are now worth dramatically less than the amount they paid for them. The housing plan uses incentives to homeowners and lenders to ease and encourage the process by which home loans can be restructured or refinanced to avoid foreclosure.

"The plan I'm announcing focuses on rescuing families who have played by the rules and acted responsibly," says Obama, who added that the plan would do this "by refinancing loans for millions of families in traditional mortgages who are underwater or close to it; by modifying loans for families stuck in sub-prime mortgages they can't afford as a result of skyrocketing interest rates or personal misfortune; and by taking broader steps to keep mortgage rates low so that families can secure loans with affordable monthly payments."

That's the right sentiment, even if the precise strategy adopted by Obama tends to reward banks and bankers that acted irresponsibly. (More on savvier approaches in a moment.)

This is not a particularly new notion, however.

Federal Deposit Insurance Corporation (FDIC) chair Sheila Bair was promoting a plan to modify mortgages last fall.

Had the Bush White House and the Department of the Treasury listened to Barr -- and to members of Congress such as California Democrat Maxine Waters -- back then, hundreds of billions of dollars might have been saved. And the dollars that were spent might have actually gone to address the real crisis, as opposed to the demand from Wall Street for money to pay bonuses, bail out speculators and keep stockholders happy.

"In the end, all of us are paying a price for this home mortgage crisis. And all of us will pay an even steeper price if we allow this crisis to continue to deepen," Obama explained in Phoenix, where he announced his initiative. "But if we act boldly and swiftly to arrest this downward spiral, every American will benefit."

We should have acted "boldly and swiftly" -- and in a fiscally-responsible manner -- last fall. Hundreds of wasted billions later, we finally are. For that, Barack Obama and his administration deserve a good deal of credit -- just as George Bush and his administration deserve a great deal of blame.

The lesson is an important one.

Focus on the people who are hurting -- not the bankers who are threatening them -- first.

To do that, Ohio Congressman Marcy Kaptur and economist Dean Baker have some smart ideas. They argue that the proper role for the federal government is not to fund mortgage negotiations but to insist that banks -- many of which have already collected billions in taxpayer dollars -- carry them out.

Short of that step, ACORN head Bertha Lewis proposes a short-term ban on mortgage foreclosures during the period when the Obama administration is implementing its plan and seeking legislative approval for key components of it.

"With 8 to 9 million Americans on the verge of losing their homes in the next four years, the nation's housing crisis demands leadership commensurate with its enormous scale, and we got that today from the Obama Administration," says Lewis. "These effective sticks and carrots will do the job that the previous all-voluntary efforts have failed to do, and help prevent millions of unnecessary foreclosures once fully operational and enacted in law. Until that time, however, there should not be a single foreclosure on any family that could benefit from this comprehensive housing plan, so we need a thorough, binding moratorium."


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See more stories tagged with: mortgages, home ownership, foreclosure

John Nichols is The Nation's Washington correspondent.

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Another effort to prop up bad debt ....
Posted by: mmckinl on Feb 19, 2009 12:13 AM   
Current rating: 3    [1 = poor; 5 = excellent]
The Obama Administration is headed down the same road as Bush ... propping up unpayable debt by transferring it from the private sector to the public sector.

We need cramdowns or nothing at all ... saving debt will only prolong the whole process of de-leveraging. Without de-leveraging our economy spirals down ward, seeking the same bottom but taking more people, more jobs and more companies into bankruptcy.

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Finance Capitalism Hits a Wall
Posted by: mmckinl on Feb 19, 2009 2:46 AM   
Current rating: Not yet rated    [1 = poor; 5 = excellent]
The Oligarchs’ Escape Plan – at the Treasury’s Expense

By Prof. Michael Hudson

"The financial “wealth creation” game is over. Economies emerged from World War II relatively free of debt, but the 60-year global run-up has run its course. Finance capitalism is in a state of collapse, and marginal palliatives cannot revive it. The U.S. economy cannot “inflate its way out of debt,” because this would collapse the dollar and end its dreams of global empire by forcing foreign countries to go their own way. There is too little manufacturing to make the economy more “competitive,” given its high housing costs, transportation, debt and tax overhead. A quarter to a third of U.S. real estate has fallen into Negative Equity, so no banks will lend to them. The economy has hit a debt wall and is falling into Negative Equity, where it may remain for as far as the eye can see until there is a debt write-down."

Finance Capitalism Hits a Wall

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Allow me to summarize:
Posted by: rickiey on Feb 19, 2009 4:41 AM   
Current rating: 2    [1 = poor; 5 = excellent]
Our government is now assisting in paying the mortgages of people who were so irresponsible that they bought a more expensive house than they could afford, using tax money from those who bought houses they could afford.

Way to promote fiscal responsibility, morons!

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

» People don't write themselves loans! Posted by: Yankeeinexile
» The point of my comment Posted by: Yankeeinexile
» You're half righ Posted by: rickiey
» I find your summary wanting Posted by: NthnBrazil
» a bit myopic Posted by: NthnBrazil
» RE: a bit myopic Posted by: rickiey
» yes and no Posted by: NthnBrazil
You gotta love his method
Posted by: Yankeeinexile on Feb 19, 2009 4:56 AM   
Current rating: 3    [1 = poor; 5 = excellent]
He says in his speech that he will offer this program only to people who live in their houses, not those who flip real estate. He stands and revels in the cheers from this populist message. Then he says the plan is not for "people who bought a house they know they couldn't afford". Not so populist.

This term irks me to no end. This totally avoids the behavior of banks and mortgage lenders during this speculative period, who GRANTED loans to people who had no business getting them. Why? To cash in. They speculated, and now don't want to suffer the loss.

Obama has shown this pattern in his speeches before. Say something grand and populist. Revel in the cheers. Then smack the crowd with something totally opposite. Sorry dude, you can't be a populist and not at the same time. Pick a side.

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» RE: You gotta love his method Posted by: VZEQICVA
Too little, too late?
Posted by: Beck on Feb 19, 2009 6:09 AM   
Current rating: 3    [1 = poor; 5 = excellent]
No, it's too much too fast!

It took a whole month!

It was precipitous and hasty!

One path is wrong!

The opposite is equally wrong!

Great, great.

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Get to the Core,
Posted by: Andie927 on Feb 19, 2009 7:23 AM   
Current rating: 5    [1 = poor; 5 = excellent]
of the problem. Why did the Banks do this, give mortgages to people they Knew couldn't afford the payments?

The average home-buyer doesn't have the knowledge to understand what's going on. The first 3 to 5 years of ANY mortgage, is almost pure interest. Translate: Profit for the bank! Then there's all those closing costs and fee's that have to be paid upfront! Points, Origination, Tittle Insurance, Realitor, Mortage Broker!
I know of one case where on a $172,000 house, they added up to $10,000! After paying for 20 months,($1433) they fell two months behind (Dec. & Jan) Bank of America filed for forclosure! That's $38,000 dollars, in Pure Profit's for the Bank, and the rest of the leaches!
The person above, despite having the same job for 5 years, was forced into an interest only mortgage, with a five year balloon! The house recently appraised for taxes, has dropped $50,000 in value!

These folk's aren't the exception. The banks, and the rest of the 'blood-suckers', realitors/brokers/Insurance agents, got theirs up front!

Now, they want the Government to give them MORE of our tax-dollars, to make it a little bit better. I think this is Wrong!

Stop this at the source. Don't wait till people are forced to 'hire' a lawyer, to file bankrupcey. Tell forclosure courts/judges, to STOP 'rubber-stamping' them! Put them into Court Ordered Arbitration, with instructions. Some of the excessive interest and fee's are to come off the principle, then a Conventional mortgage, at the lowest possible rate, is to be offered the homeowner.
If they still can't afford it, there's nothing left to be done. This method should save 40 to 60%, and reduce the bankrupcey rate as well! In the case above, I know it's true. Apply $22,000 of the $38,000, to reduce the principle, with a 30 year conventional, and they with their 16 month old son, won't end up on the streets!

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» RE: Get to the Core, Posted by: Caleb Darkstar
» RE: Get to the Core, Posted by: Quannah
» It's called fraudulent conveyance Posted by: GuitarBill
» RE: Get to the Core, Posted by: DaBear
At the expense of those who paid their bills and paid their taxes...
Posted by: ABetterFuture on Feb 19, 2009 7:48 AM   
Current rating: 3    [1 = poor; 5 = excellent]
...we are bailing out irresponsible banks and irresponsible people, by and large.

If the only thing that folks who paid their mortgages and paid their taxes get out of this "stimulus" bill is to remain in their homes and continue to pay their taxes, are we really being served by squandering the wealth of our nation on people and institutions that were bad bets--by definition--in the first place?

Would you buy a "toxic asset" for any price? Then why send our money that direction? Is "toxic" really that confusing to you? Would you buy a cereal called "Toxic Flakes"? Then why do we allow this self-imposed state of stupidity to descend upon us as a nation--a debtor nation!

The public is not being served. Special interests, banks, and a lucky couple of percentage of homeborrowers (homeowners is an ALMOST laughable misnomer ignorant folks divorced from reality keep tossing about) who manage to win this taxpayer-funded give-away.

Our children and grandchildren will hate us for living high on the hog and sticking them with the (stimulus) bill.

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The villians in the story is predadory lawyers and predatory legislators
Posted by: Illuminatus- Enlightend Classic Liberal on Feb 19, 2009 8:37 AM   
Current rating: 2    [1 = poor; 5 = excellent]
If you sign a loan agreement you are fully responsible for what you signed for.

You are fully responsible to read all of the legal text in the application form as well as in the contract.

Ignorance is no excuse whatsoever. If you are so ignorant that you do not understand that you have to repay a loan and pay a mortgage payment that you can afford, you should not be allowed to take out a loan.

It is not the governments role to take the place of the individual.

It is an outrage that we the responsible 90 % of taxpayers are to bail out financial illiterates. Or rather the bailout will in fact be paid by the 10 % top income taxpayers, the productive will once more have to pay for the risk takers, illiterates, ignorants and all kinds of other deadbeats.

Not only are the taxes going to go up, but we the responsible ones can no longer buy a house because of credit restrictions caused by morons.

I have a very good suggestion. Immediately close Fannie Mae and Freddie Mac put them in receivership and immediately repel the law that grants "affordable" housing to people that in normal circumstances cannot get a loan.

Had not Fannie Mae and Freddie Mac and sub prime lenders existed we would not have been in this mess in the first place. (It is not Freddie Mac and Fannie Mae per se but the underlying ideology created by Roosevelt and later further made catastrophic under Bill Clinton. The ideology that non credit worthy individuals should get "cheap, affordable" loans especially if you were a minority)

I am all for social mobility and for giving everybody a head start but I am totally against giving subsidies to those that do not take advantage of all the massive head start and equal opportunity programs that exist.

Ignorance caused by below average intelligence, a culture of non-work and giving up is no excuse! Nor should it be awarded.

However the US legal system needs a massive overhaul. It needs to focus on transparency, disclosure but most of all the crazy litigation and punitive damages system must be immediately repealed.

The main problem with the US economic system is not free market capitalism ( so called predatory lenders) it is predatory lawyers and legislators that have created a society of fears making contracts the size of a encyclopedia.

The Us is in fact very far from being a free market society. It is one of the most heavy regulated countries in developed world and has a tax system that distorts incentives. (No 20 in the world). The US economic system is a perfect example what happens when you have a mixed economy were legislators and big corporations create a society of fear. Massive amounts of regulations that nobody can follow, incompetent regulators giving political favors. Were lobbyist are allowed to set the agenda. And small business and the hard working people are taxed to death and the deadbeats get all the grants and welfare.

Welcome to the United States of Sweden!

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Why have so few heard of this?
Posted by: Gisele on Feb 19, 2009 8:53 AM   
Current rating: 5    [1 = poor; 5 = excellent]
550 Billion drawdown

The one question I think all Americans, and most of the world's population would like answered is.....WHO was behind the electronic withdrawal of hundreds of billions of dollars within a matter of 2 hours? WHO...could do that? WHERE, did the money go? All electronic transactions have a signature behind them somewhere, it's time for some truth here. This truly was economic terrorism. Until yesterday, I'd heard nothing of it...

Great video, but the answer is still out there somewhere.

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This just may be the last nail in the coffin
Posted by: Caleb Darkstar on Feb 19, 2009 8:55 AM   
Current rating: 1    [1 = poor; 5 = excellent]
for our economy.

We have already screwed up the banks by bailing them out with taxpayer funded stock purchases. The (preferred stock status), of these stock purchases have made investors leery of buying into banks because of the lowering of dividends.

Now we are going to reduce the value of homes and mortgages on paper to appease the borrower who was either too dumb or too optimistic when buying a home.

If you loan someone money you expect to get paid back. Now the govt. intervenes and rewrites the contract. They say that the borrower has gotten in over their head and you must rewrite the contract based on the current market price of the home. Have we forgotten that the bank PAID IN FULL for the home?

To put it into perspective, what if the bank told homeowners, When you sell your home we loaned you 150k to purchase, we feel we should receive anything over that 150k for our own coffers. So if you sell it for 200k someday the bank should receive 50k from the owner. This makes as much sense as what we are proposing to do to the banks.

What about credit cards and cars loans that were granted using financial statements regarding equity borrower's had accumulated in their homes? Now the dynamics of the borrower's credit has changed. Does it even matter, What good would it do to place a lis pending or mechanics lean on a home if it can not be enforced through foreclosure.

I read some of the comments on this sight and wonder if colleges even teach economics anymore.

Mark this down. This legislation will DESTROY what is left of the banking industry. Once it has done this THE ECONOMY IS FUCKED. This and the previous administrations have sealed the fate of our economy by overspending, overregulation, and overstepping the thin line that separates a free government from its constituents.

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Must address the other part of the Extortion- Credit cards
Posted by: Purple Girl on Feb 19, 2009 9:53 AM   
Current rating: 5    [1 = poor; 5 = excellent]
It sets my hair on fire when I hear the 'blame the victim' doctrine when it comes to US credit card debt. Our incomes have been steadily decreasing for about a decade. Our out of pocket costs- once covered by insurance-has skyrocketed. The cost of essentials have been astronomical- Food Prices have not come down because of Big Ag, Fuel Prices soared during the Oil Corps Adminstration, spiking not onlyprices at the pump, but also heating bills and electricity. A 4% cost of Living increase is only about 10% Short every year compared to the cost of living expenses.
We're up to our necks in debt because it was the onlyway to make ends meet. Luxury Vacations- Please, not in years. Big ticket Items- not on Your life.
Not only did these SOB's lose our saving and investment accounts, swindle US out of 700 billion, they are still picking our pockets with hire costs and interest rates that only increase our personal holes.
Help with Foreclosures- great, but what about the rest of US you have yet to throw a life vest? Congress throws us a brick we can cling to until 2010? Are they f*cking Kidding?
Worse yet is we get the distinct pleasure of watching our hostage held accounts be sabotaged everytime Wall Streets Boo Woo-O - Meter plummets because of a policy statment. Close the Damn market when the Adults need to have a conversation about the spoiled rotten kids who set the House on fire- I am sick of watching their temper tantrums destroy my pension and annuity funds (if of course those quarterly statements are worth anymore than the paper they're printed on)
From Greenspan down and outward should be facing prosecution for Economic Treason.Trickle Down was not flawed logic if your goal was to make the US a Feudalistic caste system- Same damn economic stratedgy the Monarchy tried to impose on US!Trickle Down was a conspiracy to destroy the American Free market, which is solely built from the bottom Up- just like any well build structure...The Foundation is far more important then the Weather vane (which is exactly All Wall Street Is!)
Ok gotta go before my pubs set on fire too! Son of a Bitch!!!!

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9 million people? Probably closer to 9 people
Posted by: billwald on Feb 19, 2009 10:34 AM   
Current rating: 4    [1 = poor; 5 = excellent]
and half of them will be millionaires. The rest of the money will go to Swiss banks.

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The bailout is too,
Posted by: lewb on Feb 19, 2009 12:39 PM   
Current rating: 3    [1 = poor; 5 = excellent]
little,too late for countless families. They recapitalized the banks,now the banks have no incentive to negotiate with mortgagees. When they were on the ropes they had little leverage and it behooved them to look at reworking mortgages to help people keep making payments.Now their bad mortgages have been paid for, hence the foreclosure
explosion. They didn't lose anything but they gained property to resell at a profit. How nice for the banks! Again and again they do it to us.
"When will we ever learn" the song goes, at this point it looks like never.

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rosongs
Posted by: rosongs on Feb 19, 2009 2:48 PM   
Current rating: 1    [1 = poor; 5 = excellent]
$75 billion and 9 million homes. Let's see, that's $8334 per home. Like that's really gonna help me pay off my mortgage. HAHAHAHAHA! Ridiculous.

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» RE: rosongs Posted by: Shey
Too little too late... hallmarks of the owning class
Posted by: DaBear on Feb 19, 2009 3:57 PM   
Current rating: Not yet rated    [1 = poor; 5 = excellent]
Too late for me. I'm ruined and even more poor as a result. Nothing I could do then, nothing I could do now. Same ole shit from the owning class.

AND the housing crunch and bubble still hasn't been even touched. It'll keep happening as the owning class wrecking crew flushes more of the taxpayers' cash down their toilets (after skimming the best off the top of course).

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Note from Yer Uncle Sam
Posted by: left_libertarian on Feb 19, 2009 4:30 PM   
Current rating: 1    [1 = poor; 5 = excellent]
Here we are at the US Treasury's printing press. It is working overtime. A lot of people are complaining - were is MY bailout?
So what we are doing is printing more money (actually we are actually borrowing money from China, although they are complaining a lot about "when are you going to repay these loans?").
Anyway to the point. We will send every person in the US a One millions dollar check. That should keep you happy for a while. Just please cash it ASAP because it might bounce.
Thank you, have fun and a nice day!
Uncle Sam

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