Update: Next step…a lender bailout?
Democratic presidential candidate Hillary Clinton called for a 90-day moratorium on foreclosures for homeowners who default on subprime mortgages.
The New York senator, is also seeking a five-year freeze on the monthly rate for subprime adjustable mortgages and a requirement that the industry report how many mortgages have been modified. In a letter to Treasury Secretary Hank Paulson, Clinton said she may consider legislation to protect lenders from lawsuits and let them convert certain mortgages into “stable, affordable loans.”
Paulson and Treasury officials are trying to craft an agreement with lenders to prevent a surge in defaults in the $11.5 trillion mortgage market. Clinton said any deal should include the provisions she has suggested.
“The administration and the mortgage industry must reach an agreement that matches the scale of the problem,” Clinton, 60, said in the letter released by her campaign today. “If you produce an inadequate agreement, or fail outright, the cost to our economy will be incalculable.”
Clinton also proposed a fund of as much as $5 billion to help communities suffering from high rates of foreclosures. The moratorium on foreclosures would be at least 90 days and only apply to owner-occupied homes.
The details of the Paulson plan are not quite clear yet, but he made general remarks this morning:
Treasury Secretary Henry Paulson said he is confident that an agreement will soon be in place to help thousands of homeowners avoid mortgage defaults by temporarily freezing their interest rates.
Paulson said the effort involves a “pragmatic response” to the worst housing slump in decades. The number of homeowners struggling to meet higher payments is soaring as introductory, lower rates are resetting. Paulson and other top Treasury officials have been holding talks with key players in the mortgage industry over the past several weeks. The plan envisions freezing the introductory rates to keep them from resetting to higher levels for a number of years.
(Update: Paulson’s full remarks are here.)
What’s so bad about falling home prices?
This is a question I’ve asked before, but blogger and columnist Daniel Weintraub at the Sacramento Bee asks it more eloquently than I did: What is so disastrous about falling home prices?
Weintraub: “It is great news when the price of energy, food, transportation, health care and consumer electronics drops. But for some reason it is bad news when the price of shelter drops.”
More: “So now that housing prices have stopped soaring and in some places are dropping, shouldn’t that be good news? Shouldn’t we be seeing stories filled with anecdotes about formerly priced-out middle-income families finally getting their chance at the American Dream?
“I understand why foreclosures are bad news, and why the impact of losing a house when you can no longer afford to make the payments is a compelling story. But for every house sold because the buyer couldn’t make the payments, there is a buyer on the other end of that transaction who got a good deal. And for every foreclosure, there are probably 10 buyers of nearby homes who benefitted from the general easing of house-price pressure.”
Unfortunately, the demagogues in politics who represent aggrieved bailout-seekers screech much louder than responsible lawmakers representing responsible citizens.blog comments powered by Disqus
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