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“And so here we are and we don’t have any systematic way to help homeowners to modify these loans,” Rep. Maxine Waters (D-Calif.) said. “I’m not even going to cooperate with you anymore,” Waters said, turning to Chairman Barney Frank (D-Mass.) whose tireless efforts she praised.
“I just want you to know as much as I respect you … you’ve been too kind, you’ve been too good and you’ve allowed them to walk all over us.”
The pressure in mounting in Washington for someone to do something for Main Street homeowners. Thus far there has been a whole lot of hot loan modification air coming out of senate halls for over a year now and it looks like Rep. Maxine Waters (D-Calif.) patience has worn thin.
Her announcement comes as the House Financial Services Committee, on which Waters sits, is chewing over the many problems lawmakers see with the Treasury Department’s $700 billion bailout fund, including why the Treasury is resisting using any money to reduce foreclosures as Congress specifically directed the department to do.
In her opening statement at the Financial Services hearing, Waters said she regrets attempting to cooperate with Treasury in giving them flexibility to respond to the economic crisis in the legislation that authorized the $700 billion package. And she regrets telling her colleagues, including members of the Congressional Black Caucus and the Hispanic Caucus, that she trusted Treasury would do what they promised to do.
“The current foreclosure crisis continues to spiral out of control and our current programs for dealing with this crisis are simply not getting the job done,” Waters said.
Waters’ action is one more sign that Democratic lawmakers want more to be done to help the exploding ranks of delinquent homeowners. Rep. Barney Frank, D-Mass., head of the powerful House Financial Services Committee, said Monday that any new proposals involving the bailout funds must include foreclosure prevention programs.
Waters proposes paying mortgage servicers $1,000 for each modification they complete, with the government shouldering up to 50 percent of any loss if a modified loan re-defaults. The plan would require that participating servicers systematically review all loans in their portfolios. Each loan would be subjected to a test to determine whether it is more beneficial to modify or to foreclose. Loans passing the test would have to be modified.
“This systematic approach is precisely what we need to keep more families in their homes. Unfortunately, while Secretary Paulson recently required Citigroup to implement the FDIC loan modification program as a condition for receiving TARP funds, he refuses to implement the plan nationwide. America’s homeowners are every bit as deserving of a bailout as the fat cats on Wall Street who created this crisis. If my legislation is enacted, America’s homeowners will finally receive the help they have been asking for,” Waters said.
FDIC Loan Modification Highlights:
Each loan will be tested to see whether it is more beneficial to modify or to foreclose.
Housing payments for delinquent borrowers two months or more late
Payments would be reduced to 31% of gross monthly income.
Mortgage rates could be set as low as 3% for five years, before increasing at an annual rate of 1 percentage point until they hit the
prevailing market rate.
Loan terms could be extended to as long as 40 years.
To encourage servicers and investors to participate, the government would share up to 50% of the losses if a borrower who had been helped ended up in default anyway.
The plan would pay servicers who process mortgages $1,000 for each loan modification.
“We are falling behind the curve,” Bair said. “We are way above where we need to be. There are a lot of unnecessary foreclosures going on that can be prevented through more aggressive loan modifications.”
Research Links:
http://money.cnn.com/2008/12/10/news/economy/waters_loan_mods/?postversion=2008121013
http://www.politico.com/blogs/thecrypt/1208/Waters_says_Treasury_walked_all_over_Congress.html
