HuffPo: It's Time to Treat America's Homeowners as Well as We've Been Treating Wall Street's Bankers

[flpoljunkie]

Arianna Huffington
Posted February 16, 2009

It's Time to Treat America's Homeowners as Well as We've Been Treating Wall Street's Bankers

The public interest -- people being able to keep their houses -- is not aligned with the banks' interest. Banks don't want to adjust nonperforming mortgages down to their actual current value because it would lead to marking down the value of the massive asset pools they have rolled the mortgages into.

This conflict between the banks' interest and the public interest is why the Wall Street-centric focus of Tim Geithner, Lawrence Summers, Ben Bernanke, etc. is so troubling. This focus has included the marginalizing of Sheila Bair, the chairman of the Federal Deposit Insurance Corporation (and a Republican) who has been ringing the alarm bell about the foreclosure crisis for two years now. She was ignored by George Bush and Henry Paulson -- and there are worrisome Washington whispers that Tim Geithner is following in their footsteps.

Until 1978, allowing cram downs was standard practice. Subsequent court battles eventually eliminated their use. The mortgage industry, not surprisingly (and for the reasons stated above), is vehemently opposed to bringing the cram down back. Helping fight that battle, again not surprisingly, are Republican members of Congress. A bill to bring it back was approved by the House Judiciary committee in late January -- but only after chairman John Conyers agreed to key concessions to the banking industry, including making the legislation only apply to existing mortgages and not to future ones (even though cram downs could help stabilize the residential mortgage market in the longterm.

Obama has said that it "makes no sense" to keep judges from having the authority to rescue underwater homeowners. He should push to make cram downs ongoing and permanent.

His plan should also include mandatory mediation between homeowners and lenders prior to any final foreclosures. A pilot program along these lines, the Residential Mortgage Foreclosure Diversion Program, started in Philadelphia, has proven very successful. According to one account, the program has prevented or delayed foreclosures in 75 to 80 percent of the cases that have made it to mediation. Currently, many homeowners don't even talk to their lenders until they have been foreclosed on -- partly because the lenders often make it next to impossible to reach them.

It's time to start treating America's homeowners as well as we've been treating Wall Street's bankers.

http://www.huffingtonpost.com/arianna-huffington/its-time-to-treat-america_b_167429.html

[Duer 157099]

1. and what about Renters?

Renters actually pay the mortgage for homeowners, what about them??

[Shakespeare]

7. We're fucked, as per usual.

The deification of the American Homeowner gets to be just a bit much sometimes.

[BlooInBloo]

2. Both were, in the large, irresponsible. If you're gonna bail one out, should do the other as well.

[midnight]

3. I agree, and can we please add to the wish list ,access to ,medical

treatment like dick Cheney receives. That's all-thanks.

[flpoljunkie]

4. I believe Obama will work toward universal health care.

[AtomicKitten]

5. I hope they get ahead of the credit card banking abuse practices too. n/t

[flpoljunkie]

6. Particularly since banks have just announced higher rates and fees!

[AtomicKitten]

8. That after taking a taxpayer-funded bailout!

:mad:

[flpoljunkie]

9. I feel your rage, AK!