Rescuing homeowners
The common complaint about the newly minted federal bailout plan is that it rescues Wall Street but ignores Main Street. There are signs, however, that Main Street is due for a little relief -- though not necessarily from Congress. A massive settlement in a lawsuit against the mortgage giant Countrywide promises a lifeline of more than $8.5 billion to borrowers drowning in the mortgage meltdown.
The lawsuit, brought by several states including California and Illinois, charged Countrywide with duping people into bad subprime and adjustable-rate loans. The agreement basically compels Bank of America (which has absorbed Countrywide) to help potentially as many as 400,000 borrowers avoid foreclosure. The measures center on renegotiating loan terms and adjusting rates to help homeowners manage payments. The company will also rein in the risky lending practices that helped stoke the crisis, like doling out minimally vetted "no doc" loans.
The program, set to begin in December, offers a model for dealing structurally with the crisis, which some say is frightfully absent from the new bailout legislation. Though the act does require the Treasury to act to mitigate foreclosures, some say the bill's language is toothless.
The Center for Responsible Lending said the bailout plan's vague provisions for encouraging loan modifications
"would have very limited impact, since Wall Street splintered home loans into complex securities, making it very difficult for the government to take any effective action on the resulting scattered pieces of mortgages."
Community advocates want legislation to let bankruptcy courts intervene to prevent foreclosures, along with more systematic programs to compel both servicers and the government to provide large-scale relief.
Though some states, including New York, have recently boosted efforts to aid people facing foreclosure, critics say the impact may be limited without stronger federal guidance. Loan workouts tend to be tricky because the loan servicers are often tethered to the profit motives of the bank looking to collect on the mortgage.
The latest data from a national coalition on foreclosure prevention suggests that giving loan servicers wide latitude to deal with borrowers is digging communities into a deeper hole.
Last week, a coalition of civil rights, fair lending and community groups warned that the political jockeying around the bailout ultimately "squandered" a chance to address the foreclosure crisis at its roots.
"Now that Wall Street’s needs are being addressed, we expect that the next order of business will be to get back to work for the struggling families left behind."
But in the wake of the bailout frenzy, the voices of struggling mainstreeters may have trouble breaking through the unrelenting clamor of the the stock market and the media static of the election campaigns.
So it may be a while before Washington can really answer the painful anxieties haunting homeowners across the country. For now, borrowers can direct their questions to Bank of America's toll-free hotline: 800-669-6607.
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Comments (4)
Help for the losers at the root cause of the problem.... why? What does everyone think "bad loans" are? Any loan that is being paid back is a good loan, so the bad ones are the ones people aren't paying back. Why, if they went in over their head is it my problem? Or the bank's problem? Why should I be worried that, after bailing out their bank and the financial system that non-payers helped collapse, that non-payers get restored? How about a special 'Thank You' payout to reward those who took loans they could pay off and are paying them? Maybe an extra little bit in there if you've even paid on time! It is time to step up and reward the DESIRED behavior. Not the greedy behavior of Wall Street, or the irresponsible behavior of the non-payers.
Donald Trunp once said, "If you owe the bank $350,000 and can't pay it back, you have a big problem. But, if you owe the bank $35,000,000 and can't pay it back, the BANK has a big problem."
While I understand the underlying feeling of 'why should I have to pay because they got themselves into trouble', I also understand that the sheer number of those unable to pay their debts creates a huge problem for the bank, and that unfortunatley will impact all of us.
The most logical solution does not require someone be punished for another's mistake.
The only way to make an already contracted mortgage more 'affordable', is to force the bank underwriting the loan to accept terms which results in a net loss to the lender. The underlying assumption is the financially strapped homeowner will suddenly be capable and willing to make their monthly payments on time. I would suggest that is a gamble which is no more sound than the original 'sub-prime' mortgage was.
Rather than force banks to renegotiate loan contracts, which may or may not result in a lower forclosure rate, the Government can better help those strapped homeowners by actively seeking buyers willing to assume the debt in return for title to the home.
We are acting as fools if we believe continuing to allow a large number of people, who have already displayed inadequate income and/or self control to pay down their debts timely, to renegotiate and continue to hold mortgages is somehow going to cure the problem.
It is like sending a gambler for counseling at OTB.
Is this going to help all of the Illegal Alien "homeowners"? If not good, if yes then I want to denounce my citizenship and become an Illegal Alien.
Let’s face it they signed their name on the dotted line, they are now responsible. What did they think an adjustable rate is, adjusted to their callousness, adjusted to what they wanted...?
When you purchase a home there are lawyers, buyers, sellers, real estate agents and sometimes the banks. All of these people involved in the purchase of a house and the buyer is unaware of what they were doing? If that is true that the buyer was conned into buying a house with all of the professionals present, then that would point to a conspiracy.
I think that the bailout is a good and bad thing all wrapped up together. I think that a lot of this country is "irresponsible" with money in one way or another. I am a homeowner who is facing foreclosure.. No I am not an "illegal" alien, or a single mother with children, who expects people's tax money to help her live. I work full time and have had the door slammed in my face while trying to save my home, because I don't make enough money. Obviously if I made enough, I would not be in the predicment that I am in. But it seems that you will only get the governments help if you are "upper" middle class and meet all the bs requirements that have been placed with this bailout.