You might have already read Alex Clark’s article on the Bush plan to help homeowners, named optimistically “Hope for Homeowners.” Commenters on that post were less optimistic. Seems a lot of lenders won’t touch the program, though that might be because the program itself is new and everyone is so gun-shy right now.
That leaves President-elect Obama (Hi, Obama, if you’re reading!) in a tough place. He wants to act immediately on this issue, but has multiple, and conflicting voices to listen to as he plans a methodology. I feel for the guy. We want someone to bail us out of a clusterf*** that is 8 years in the making, and we want him to do it yesterday.
Sunday’s Chron outlines the issues Obama will draw from in taking action:
“Unlike his opponent, Sen. John McCain, he did not urge the government to buy up bad home loans and reduce them to the homes’ new values, putting taxpayers on the hook for the difference. But some of Obama’s proposed $10 billion fund would help homeowners who are facing foreclosure ‘through no fault of their own’ by letting them refinance mortgages through the Federal Housing Administration, Fannie Mae or Freddie Mac.
What Obama accomplishes depends, in part, on what the Bush administration does about housing in its waning days.”
Well, that admin is credited with the Hope for Homeowners program, to which $300 billion dollars was allocated. Other moves under consideration:
- a proposal by the Federal Deposit Insurance Corp. similar to what it is doing to modify IndyMac mortgages. The FDIC plan would use $50 billion from the $700 billion bailout bill to modify mortgages.
- a mortgage-industry proposal to split losses on modified mortgages with the government. Treasury has not confirmed these reports.
- In recent weeks, some large lenders including Bank of America and JPMorgan Chase have announced their own mortgage-modification plans.
- Rick Harper, director of housing at the Consumer Credit Counseling Service of San Francisco, says it’s becoming much easier for borrowers to get a mortgage modification.
In his address to the nation last Friday, Obama said: “It’s ‘absolutely critical that the Treasury work closely with the FDIC, HUD and other government agencies to use the substantial authority they already have to help families avoid foreclosure and stay in their homes.”
To do that though is not going to be an easy task. That’s why I want to ask the experts out there what Obama, in case he’s reading (and if you are, Obama: Hi!) what he should do first. And then second. And third.
Some conflicting advice and ideas he’s already getting:
- Dean Baker, co-director of the Center for Economic and Policy Research, says the most expedient thing Obama could do would be changing the law so Bankruptcy Court judges can modify mortgages on primary residences. These judges already can change the terms of other debts, including commercial loans and loans on second homes. On the opposite side of that argument: “Allowing judges to reduce mortgage balances on primary residences ‘will destabilize the market exactly at a time when we should provide stability,’ says Steve O’Connor, senior vice president with the Mortgage Bankers Association. “
- a 90-day moratorium on foreclosures (but what would come after that?)
- a $10 billion foreclosure-prevention fund
- a mortgage tax credit of up to $800 a year for homeowners who don’t itemize their deductions, but some experts say “the tax credit would do little to stimulate housing because it would mainly benefit people who have owned homes for many years”
It’s all enough to make a President run off to Camp David–only we need this President on the job. How can he maybe do it well?