Still waiting on Main Street
Posted by James O'Rourke on October 27, 2008
October 27, 2008
THE US Treasury Department needs to take the same kind of aggressive steps to ease financial strains on homeowners that it took to guarantee the investments of banks and financial institutions. The economy can’t turn around until the housing market stabilizes. That requires a timely plan to stem mortgage defaults and foreclosures.
Debate is underway at Treasury on how best to craft loan modifications. But it is already clear what won’t help: the actions of irresponsible hedge funds that resist proposals to soften the terms of troubled home mortgages. Two such funds, Greenwich Financial Services and Braddock Financial Corporation, have advised their mortgage servicers to steer clear of government-sponsored efforts to renegotiate delinquent loans. It’s a disgraceful tactic by an industry that invites the toughest response from the House Financial Services Committee, which has scheduled a hearing on the matter on Nov. 12.
Foreclosures rose to 765,000 during the third quarter of this year, a 71 percent increase over the same period in 2007. The talk has shifted from whether homeowners who can’t pay their mortgages deserve consideration from the government to how to help enough of them to stabilize the economy and keep the housing market from an even deeper dive. The voices that should be heeded now are those that argued all along that loan modifications should be a significant part of the $700 billion financial rescue bill passed by Congress this month.
One such voice belongs to Sheila Bair, the chairwoman of the Federal Deposit Insurance Corporation. Last week, she outlined a plan that would provide government guarantees to holders of troubled loans, provided the lenders reduce the interest rate or principal. Another powerful voice belongs to House Financial Services Committee Chairman Barney Frank, who is calling for the federal government to use $100 billion of the rescue bill to buy up and refinance the mortgages of people at risk of losing their homes.
There is no single solution to the foreclosure mess, just as there is no single source of the funds that fueled the sloppy subprime loans. One bold idea calls for troubled borrowers to forfeit their deeds to lenders but remain in their homes as renters with a future option to buy back the home. Others focus on strengthening this summer’s Hope for Homeowners plan, which requires delinquent homeowners who receive mortgage write-downs to share profits from future sales with the government.
Action must come soon. It’s not just credit markets that need help to survive.
Corey G said
I think that regardless of what the Federal Government does there a lot of people that will fall through the cracks. They might have already lost their homes. They could have just enough money and are now watching their bank accounts dwindle and are close to the bottom. Lets be realistic the banks don’t want to negotiate if you still have money and are making payments and every loan and lender are not created equal. If your considering a Loan Modification i invite you to look at the blog at… TheLoanModificationBlog.com
Being Proactive about Loan Modifications is paramount to getting the best deal possible.
David K said
Corey, I worked in early Debt Negotiation and its amazing what you can do when the little guy gets the right representation and fight back.
Krisitna the Contractor said
I am a General Contractor due to economy I have lost my business. Now I am loosing my home. In less than a month I will be homeless, out of work and into a car with two dogs. Joe the Plummer is a guy with no lic, just a man that wanted to buy a business. I am lic’d, building a business that greed has taken away I am also FEMALE what happened to equal opportunity gone I guess. I found it very unfair that both canidates used this person as an example. I did not vote due to this. I have no voice.30 years of struggle just to have a lic and end up homeless. Maybe I can eat it when I have no food.Thank you, State of California thank you President Bush for pushing me soo far to the bottom of any list. P.S. can’t even get GR fast enough. This is messing up my mental health. Thank you for destroying me.