Thread: Hillary’s socialist housing bailout plan

Hillary’s socialist housing bailout plan

If you thought Hillary Clinton’s health care takeover plan was bad, wait ’til you see what she has in store for the housing sector. As always with the Clintons, the market is the problem and Big Nanny (and Big Fannie and Big Freddie) are the solution. Last week, she unveiled her “four-point plan” to protect the American Dream of homeownership. She’s wildly waving around $1 billion promises here and $1 billion promises there. Look out: http://campaignsandelections.com/nh/articl...ndex.cfm?id=473

Clinton Unveils Affordable Housing Policy, Reaching Out to Middle Class
Beth LaMontagne
(August 7, 2007)

For the past few weeks, the headlines of business sections in newspapers across the country have been dominated by news of the troubled housing industry. Home foreclosures are up, sales are down and the lending industry is facing troubling economic times as well.

On Tuesday U.S. Sen. Hillary Clinton, D-N.Y., offered a four-point plan she will to take to the Senate this September that aims to resolve some of the problems in the home lending market. While this has not been a top issue in the election, like the war in Iraq or health care, it is an issue that is likely to be on the minds of Americans because of the bulk of news coverage it has received and its impact on their everyday lives.

This is one of a number of policy addresses Clinton has made in New Hampshire. Others include health care for children, cleaning up government corruption and waste and reducing energy costs. Dean Spiliotes, a local political analyst, said Clinton's policies have been resonating amongst the bread-and-butter, middle-class, traditional New Hampshire Democrats. These speeches, he added, are likely aimed at hanging on to the ones she's got and hopefully attracting a few more.

"I do think there is some targeting there," he said. Bill Clinton managed to bring a number of middle-class, "Reagan Democrats" back to the party during the 1990s and Spiliotes said he sees Hillary Clinton possibly doing it again. "[To] voters who were attracted to [Bill] Clinton because of his economic policies, ... if she had moved away from this dramatically, that would hurt her. ... But I think she has continued to focus on this demographic. I don't think this is some new approach she has fostered."

In her address to about 250 people in a Derry elementary school gymnasium, Clinton criticized unscrupulous mortgage brokers who push customers into borrowing more to pad their commission or are dishonest about the true cost of the loan. To help curb the number of foreclosures, Clinton proposed setting up a $1 billion fund to assist homeowners in making arrangements with lending companies to stay in their home.

She also discussed the lack of affordable housing, an issue that is particularly a problem in New England. To promote more affordable housing construction, Clinton proposed another $1 billion fund which would be distributed to state, county and local affordable housing programs.

Clinton, in her address, referenced campaigning with her husband in New Hampshire in 1991 and 1992. During those years, the housing market was in a slump and Bill Clinton's campaign held an event to focus on home foreclosures.

"We all took a big sigh of relief during the 1990s, didn't we?" said Clinton. "We didn't face a lot of these economic problems that cut right to the heart of the American dream ... [but] here we are. We're back again."

Clinton recounted a number of scenarios where not just low-income families, but middle-class families find themselves in a difficult financial situation and face home foreclosure. In New Hampshire, there were 1,400 foreclosures in the first six months of the year, compared with 147 in all of 2006, said Clinton.

"It's a combination of economic policies that are not working for the majority of American people and unsavory practices that are undermining the dream of home ownership," she said. Clinton took shots at President George W. Bush's economic policy and pledged to be the president who supports American homeowners.

"We've got to figure out how we are going to help each other until we finally, once again, have a president who doesn't think his only job is helping those who are already rich get richer," she said.

Clinton plans to address the need for more affordable housing, as well as the need to improve all aspect of America's infrastructure tomorrow in Rochester.


The full plan is at her campaign blog, where she’s soliciting personal stories of homeowners “at risk.” Guess she’s tired of hearing John Edwards trot out his health care victim James Lowe anecdotes. Hillary wants her own homeowner victim James Lowe... http://www.hillaryclinton.com/feature/mortgage/?sc=8




Hillary appeared on CNBC last week to pimp her plan. Unsurprisingly, she’s demonizing lenders and brokers the way she demonized the pharmaceutical industry: http://www.cnbc.com/id/20157294

“I think a lot of the lenders have really taken advantage of what is a really tough economic situation for many Americans,” Clinton told CNBC’s Dylan Ratigan during the live interview. “Although many of us have done well in the last six-and-half years, the median income in America has dropped $1,300, while healthcare costs, tuition and other costs that are really part of a middle class and working family’s budget have increased.”

In order to ensure mortgage brokers are qualified, she also thinks there should be more screening and a national registry of brokers as well as greater disclosure of the terms of broker compensation.

Clinton also proposed a $1 billion federal fund for local and state programs that help at-risk homeowners avoid foreclosures. She said those programs could help the “unsuspecting families” linked to unfair mortgages.

She also proposed that lenders remove early payment penalties attached to some mortgages. “A lot of buyers think the brokers are actually representing them, when we know the brokers get paid depending upon the size of the mortgage they are able to sell,” she said.

For a salty, detailed smackdown of the CNBC interview, see this mortgage specialist’s blog. Read the whole thing, but here’s his bottom line: http://anotherfuckedborrower.blogspot.com/...he-hillary.html

People need to be fiscally smarter, think for themselves, and not run with the herd. There is nothing that can be done to support property values where they are in many areas, and borrowers do NOT need to be rewarded with taxpayer money for over-extending themselves…

…In closing, as bad as it was waking up to Hillary Clinton on my tv…I would rather be forced to see pictures of her cleavage (don’t ask me why that was nationwide ‘news’) than have to see the results of her proposed guvment programs.

Government Shouldn't Bail Out Failing Homeowners
By Jonathan Hoenig
August 13, 2007

WITH ELECTION SEASON in full swing, politicians of every party and persuasion are falling over themselves to propose ways to remedy the millions of people adversely affected by the dramatic shift in housing and credit markets. Sen. Hillary Clinton, for example, has proposed the establishment of a $1 billion fund to help states help borrowers who are in danger of foreclosure.

Most people with even a cursory knowledge of free market economics understand that governmental interference doesn't alleviate problems; it simply makes them more severe and longer lasting. If someone can't afford to pay their mortgage, certainly the government paying it for them for a few months isn't going to make any meaningful difference.

In reality, it simply distorts the rational allocation of assets and ultimately drives up costs for both lenders and borrowers. The negative byproducts of governmental intervention in a free market are well documented, and were most recently seen in agriculture, where massive subsidies for ethanol production have led to skyrocketing corn prices.

But the real reason to oppose a bailout isn't that it's impractical, but that it's immoral.

To live freely means to act in accordance with your own rational beliefs and to accept the consequences of your decisions, no matter how unwise they might seem after the fact. Those individuals who made financial commitments they can no longer afford to honor have no right to demand taxpayers bail them out. In America, we have the right to "life, liberty and the pursuit of happiness," but not the guarantee we can live in the four-bedroom Colonial that's priced way beyond our means. It might sound cold, but homeowners who can't pay their mortgages should not expect to be able to keep their homes.

As traders, we are unquestionably comfortable with this sort of personal responsibility. If we make poor investments and lose money, we certainly don't expect the government or anybody else to bail us out.

But Americans, especially many populist politicians, believe that individuals deserve to have their mortgage paid simply because they can no longer afford to pay it themselves. Forgetting the fact that these individuals willingly took out loans well beyond their means or didn't plan for a rainy day in which the real estate market wasn't soaring, politicians on both sides of the aisle say they are entitled to keep their home. So they plan to take other people's hard-earned money and give it away...not because these individuals did anything to deserve it, but simply because they need it. It's the essence of the "entitlement mentality" I wrote about last winter.

The purpose of government is to protect my rights — end of story. But because there is no such thing as a right to a home, using taxpayer dollars to bail out homeowners or home lender, is an immoral abuse of governmental authority.

Those who advocate for such measures tend to think with their hearts instead of their heads. When challenged about the morality of such schemes, they usually present a tragic example about a down-on-their-luck Rust Belt family who are in danger of being evicted from their home. Dad lost his job at the plant, mom is on dialysis and takes care of the kids, all of whom desperately need braces and new books for school. The argument is always an emotional one: "Don't you want to help poor people in need?"

But a government bailout is not charity — it's coercion. Americans are incredibly charitable people, last year donating a record $295 billion. But when you donate to Habitat for Humanity, for example, you do so voluntarily, deciding how much you'd like to give and to what particular cause. When Hillary pledges $1 billion in financial aid for homeowners, however, it's not her money; it's the taxpayers', many of whom would undoubtedly prefer to give to any number of other deserving recipients.

The other tactic used by proponents of a bailout is to demonize the banks and mortgage companies for making "predatory" loans to financially unstable families, as if somehow loaning someone money is harming them. What's ironic is that for years, elected officials chastised businessmen for failing to offer loans to people with poor credit. After the private sector stepped up and many billions in loans to lower-income families, many of those loans are not being paid back, and those same businessmen are being criticized for making the loans in the first place. Indeed, businessmen are the scapegoat either way.

The more the government gets involved in mortgages and banking, the tighter credit will become. But beyond the impractical reality of collectivist economics, a bailout of homeowners facing foreclosure would be an immoral violation of the property rights of the millions of citizens who live within their means and pay their bills on time. The responsibility of paying back subprime mortgage rests with those who took them, not the publicity-seeking politician eager to sacrifice the individual for the "public good."

http://www.smartmoney.com/tradecraft...story=20070813

One last analysis to share with you from Matt Carrothers, who dubs her Hillary Clinton Corleone: http://www.northstarwriters.com/mc019.htm

August 13, 2007

Hillary Clinton Corleone, Mortgage Lender

There is a key sequence of scenes in “The Godfather: Part II” in which a young Vito Corleone exerts his ascending power and influence over New York’s Little Italy neighborhood. A poor widow named Signora Colombo asks Corleone to intervene with her landlord, Roberto, who wants to evict her. Colombo cannot afford to move, and she has no where else to live.

Corleone seeks out the landlord Roberto and offers to pay six months of Signora Colombo’s rent in advance, at an increased rate. Roberto refuses, but soon finds out that Vito Corleone is not a man given to negotiation. A trembling Roberto then visits Corleone and says that Signora Colombo can not only stay in her home, but he will greatly reduce her monthly rent. Roberto leaves, and Corleone’s friend Genco declares, “God Bless America. We’re gonna make a big business.”

The Democratic presidential candidates see today’s Signora Colombos – families who defaulted on adjustable rate, sub-prime mortgages they could not afford – just as Corleone saw the poor widow – as helpless perdente, manipulated by others, who could not survive the mean streets without the helping hand of Don Vito Government.

On August 7, Sen. Hillary Clinton announced her detailed plan to “address mortgage lending abuses.” Clinton’s press statement, found on her web site, begins, “With foreclosure rates continuing to skyrocket across the country, Senator Hillary Clinton . . . laid out a plan to preserve the American dream of home ownership that would crack down on unscrupulous brokers, curb mortgage-lending abuses, assist families facing foreclosure and expand affordable housing options.”

The concept of borrower responsibility is obviously lost on Clinton. She then cites the plight of her own Signora Colombo, a woman named Kristi Schofield. Kristi and her husband can no longer afford to live in their home, because their adjustable-rate mortgage payments grew from $2,400 to $6,000 per month.

Signora Schofield said, “We tried to do the right thing and continued to make the payments as long as we could with our savings and what earnings we had from unemployment, temporary and part-time work.”

Schofield added, “Hillary Clinton is standing up today because she wants to help protect the American dream.”

In truth, Clinton’s plan would heap onerous and needless new regulations on the mortgage industry and establish a $1 billion housing trust fund to help “at-risk borrowers avoid foreclosure.” In other words, Clinton’s plan requires responsible taxpayers to subsidize the mortgage payments of deadbeats unable to comprehend the concept of adjustable mortgage rates.

Worse, if Clinton’s plan and similar plans touted by her Democratic opponents were to become law, the element of risk in borrowing and investing capital would disappear. If borrowers and investors incur no risk due to federally subsidized payments, nothing would stop lenders from inflating their home mortgage rates far beyond market-established values. Government subsidies have already distorted the free market and raised costs through agriculture, college tuition and health care programs.

An August 7 Wall Street Journal article that details the credit and mortgage situation quoted former Federal Reserve Chairman Alan Greenspan, who said, “These adverse periods are very painful, but they’re inevitable if we choose to maintain a system in which people are free to take risks, a necessary condition for maximum sustainable economic growth.”

Preach about it, Mr. Greenspan. The ability to risk money in the various investment markets, in startup businesses, in research and development of new products or in a family home fuels our nation’s turbocharged economic engine. These invested dollars, in turn, produce individual wealth for the risk takers, new consumer products and new jobs.

Contrary to Clinton’s pontifications, the American Dream is not to have the federal government make your house payment. The American Dream involves creating and acquiring enough wealth to make your own house payment, own your own retirement plan and have adequate remaining resources for both necessities and recreation.

Not surprisingly, the media and liberals have grossly overstated the so-called mortgage crisis.

Economist Jerry Bowyer, writing in National Review, found that just 0.6 percent, or 254,000, of the 44 million mortgages in the U.S. are currently in foreclosure. Additionally, the breathlessly reported sub-prime meltdown has caused an increase of only 35,000 mortgage foreclosures in the last quarter.

Thirty-five thousand homes in foreclosure is not a skyrocket. It’s a suburb.

A new study by the National Assessment of Educational Progress found that just 33 percent of high school seniors could explain the effect of an increase in interest rates on consumer borrowing. America’s Signora Schofields do not need a mortgage bailout. They need a lesson in finance.

Without a national crash course in economics, finance and personal responsibility, Ronald Reagan’s Shining City on The Hill could soon become Hillary Clinton’s Cosa Nostra.



Can’t pay your mortgage? Fugetaboutit.

In case anyone is wondering why I am so negative about the GOVERMENT handling this needs to read up on the Gulf Coast Road Home Plan - 23 BILLION federal ( your taxdaollars at work ) and it is all gone. Thousands of people can't even get their claims addresed and the money is all gone ... red tape and sweetheart deals and who's in bed with who ?

[i]What *they* say...

John Edwards "The Road to One America - Ninth Ward of New Orleans"
http://www.youtube.com/watch?v=xAqktFnA4nk&eurl=

[i]What *they* do ....

Welcome to John Edwards’ America, a land where Democrat presidential candidates demonize the businesses that made them rich. Via the WSJ today, a fresh look at silky hypocrisy. Headline: “Edwards, Foreclosure Critic, Has Investing Tie to Subprime Lenders:” http://online.wsj.com/article/SB1187...ats_news&apl=y

As a presidential candidate, Democrat John Edwards has regularly attacked subprime lenders, particularly those that have filed foreclosure suits against victims of Hurricane Katrina. But as an investor, Mr. Edwards has ties to lenders foreclosing on Katrina victims.

The Wall Street Journal has identified 34 New Orleans homes whose owners have faced foreclosure suits from subprime-lending units of Fortress Investment Group LLC. Mr. Edwards has about $16 million invested in Fortress funds, according to a campaign aide who confirmed a more general Federal Election Commission report. Mr. Edwards worked for Fortress, a publicly held private-equity fund, from late 2005 through 2006.

Asked about the matter, Mr. Edwards yesterday pledged that he would personally provide financial assistance to New Orleanians who are facing foreclosure by Fortress-affiliated businesses or have lost their homes already. “I intend to help these people,” the former North Carolina senator said.

He also promised to cleanse his portfolio of any investments that may be profiting from their losses. “I am going to divest” from any Fortress funds that have a stake in the subprime lenders that filed the foreclosures, he said in a telephone interview. “I will not have my family’s money invested in these firms.”

Such a man of belated principle is he.

Mr. Edwards didn’t give details on how or when he was going to proceed, either to alter his holdings or to aid borrowers. He said he plans to begin making amends to New Orleans homeowners first by contacting them and “seeing where they are in the process.” He said his help may come from his own cash or in collaboration with a charity that specializes in repairing homes. The foreclosures, Mr. Edwards said, “run counter to what I’m about.”

On the campaign trail, Mr. Edwards has particularly attacked lenders behind foreclosures in storm-slammed Louisiana. In April, he visited the devastated Lower Ninth Ward neighborhood to voice one of his main antipoverty planks: a proposal to rein in subprime-mortgage companies whose “shameful lending practices,” he said, threaten millions of working-class homeowners. “While Washington turns a blind eye, irresponsible lenders are pulling a fast one on hard-working homeowners,” Mr. Edwards said a few days later.

At the time in late 2005 when Mr. Edwards went to work for Fortress, it already had a stake in one subprime lender that subsequently foreclosed on some Katrina victims, Green Tree Servicing LLC. While he was there, Fortress acquired a second, Nationstar Mortgage LLC. Fortress paid Mr. Edwards $479,512 in 2006 for part-time work, a Federal Election Commission report in May showed.

After leaving the firm, he kept about half of his net worth in Fortress funds. And Fortress employees have collectively made up the largest class of political contributors to Mr. Edwards. Workers there put up more than $150,000 toward his presidential run in the first six months of the year.

The WaPo asked Edwards about Fortress in May.
http://www.washingtonpost.com/wp-dyn...051002277.html

He says he was clueless.

Yeah:

The hedge fund that employed John Edwards markedly expanded its subprime lending business while he worked there, becoming a major player in the high-risk mortgage sector Edwards has pilloried in his presidential campaign.

Edwards said yesterday that he was unaware of the push by the firm, Fortress Investment Group, into subprime lending and that he wishes he had asked more questions before taking the job. The former senator from North Carolina said he had asked Fortress officials whether it was involved in predatory lending practices before taking the job in 2005 and was assured it was not.

And besides, when Edwards is involved with it, it isn’t “predatory lending,” you see. It’s called helping the poor, of course! Spin, spin, spin those Two Americas, Johnny Boy. More from the WSJ:
http://online.wsj.com/article_print/...546999884.html

Edwards aides, while apologetic for the foreclosures, defended subprime lending in general. They pointed out the distinctions between subprime loans, which are extended to people with less-than-stellar credit, and “predatory” loans, which often target the same consumers but employ pressure sales tactics and punitive covenants that can strip equity from home buyers and tie them to onerous payments. Subprime loans, defenders note, can benefit many lower-income people previously locked out of home ownership.

Mortgage experts say there’s no clear line dividing standard subprime loans from “predatory” ones. Generally speaking, said Thomas Lawler, a former official at mortgage buyer Fannie Mae, predatory loans carry high interest rates that are allowed to rise but not drop. They may be loaded with prepaid fees. Lenders may make monthly payments look smaller than they really are by not requiring borrowers to put taxes and insurance in escrow. And the loans generally don’t allow early payoff without a steep penalty. That bars refinancing if interest rates drop.

Maybe someone should organize a “poverty tour” of those 34 homes in New Orleans whose owners have faced foreclosure suits from subprime-lending units of Fortress. http://www.nytimes.com/2007/07/16/us...5088&partner=r



Have a chuckle. Read John Edwards’ campaign page on “fighting predatory mortgages.” http://johnedwards.com/issues/predatory-mortgages/


Betsy Newmark weighs in: http://betsyspage.blogspot.com/2007/...-campaign.html

I still think that there is something suspect about this nothingburger of a job that Edwards had there at Fortress. He earned close to half a million dollars for a 15-month stint working at Fortress to study the relationship of capital and poverty, but seemed to miss the whole involvement of his employer with subprime lending. If you or I wanted to study poverty and capital, we’d probably have to go to a university and do some research. Giving a job for someone to do some study while on the job just doesn’t rate a six-figure salary for anyone besides a potential presidential candidate. It seems yet another way to get around the campaign finance laws.

3 ways to help borrowers without bailing them out
Wed Aug 22, 12:22 AM ET

The July foreclosure numbers that came out Tuesday are a sobering reminder of just how bad the nationwide mortgage crisis is becoming. Fueled in large part by shaky lending to people with far less than perfect credit, foreclosure filings nearly doubled from a year ago and are running at an annual rate of more than 2 million.

That's still a small percentage of total households, but analysts warn that the big wave is still building. Many of the weakest loans were made in late 2005 and early 2006, and their two-year "teaser" rates will expire in the months to come. Many more homeowners could find themselves in trouble when their rates reset and their mortgage payments jump.


In reaction to the housing meltdown, Congress and regulators are already working to curb "liar loans" (no proof required that a borrower can actually repay) and other nutty lending practices. The Federal Reserve is moving to reassure jittery financial markets by pumping in billions of dollars and cutting the interest rate it charges banks.


That's all well and good, but what about the people who are falling behind on their mortgages and losing their homes? This is, after all, more than just a personal tragedy.


Foreclosures, especially millions of them, can become a nasty, self-reinforcing cycle of falling home values. The credit markets have already been badly rattled by defaults in mortgages that were packaged and resold as supposedly safe securities. Together, this threatens the broader economy and makes it everyone's problem.


As hard as it is to see people lose their homes, it's easy to say what not to do: Don't use taxpayer money to bail out lenders or borrowers. Deceptive and predatory lenders don't deserve it, nor do borrowers who knew or should have known better. The market's brutal efficiency is already meting out appropriate punishment. If government gets into the business of using tax money to protect people from the consequences of poor financial decision-making — a risk in proposals by some Democrats to aid homeowners — that virtually guarantees bigger problems down the road.


So, short of a bailout, what to do? There are at least three good ideas:


•


* Bankruptcy reform. About the only debt a bankruptcy judge can't modify is a home mortgage. Borrowers used to get into trouble not because of unsustainable mortgages, but because they lost a job or got ill. Now homeowners commonly fall behind because they can't keep up with their mortgages. Bankruptcy judges should get more latitude to rework mortgages along with other debt.


•


* Tax code changes. Sometimes, badly strapped homeowners can persuade lenders to reduce the size of a mortgage to reflect a home's plummeting value or the homeowner's inability to keep up with the payments. Sometimes, the lender forecloses and a homeowner can walk away with no house, but also no debt. That would seem to be the end of the story, but it isn't to the IRS, which often considers either action as income to the borrower, and sends a big tax bill. It makes sense to alter the code to keep the tax collector from making a bad situation worse.


•


* Education and advice. Sometimes, a home could be saved if its owner only knew that it was possible to renegotiate the mortgage — and that a lender might prefer getting smaller payments to no payments at all. Scores of state organizations and non-profit community groups are working to educate and counsel homeowners, and in many cases to help them renegotiate their mortgages to keep their homes.


Congress' Joint Economic Committee says the cost of mortgage counseling is often $1,000 to $3,300. But the cost of foreclosure — including lost home equity to the borrower, lost mortgage payments to the lender, lost tax payments to the local government and lower values in the neighborhood — is as much as $80,000. If that's true, this could be a useful way for all of those parties to moderate their losses.


As the foreclosure numbers build, accompanied by wrenching personal accounts, the political pressure for bailouts is likely to mount. Policymakers must resist the pressure but should find practical ways to lend a hand.

http://news.yahoo.com/s/usatoday/200...gtc99UlXus0NUE

Bush outlines aid for mortgage holders
By DEB RIECHMANN, Associated Press Writer
6 minutes ago

WASHINGTON - President Bush outlined ways the federal government can help troubled borrowers keep their homes Friday in an effort to address rising foreclosures fueled by the mortgage crisis.

The administration's first attempt at dealing with a wave of defaults is not aimed at bailing out lenders, however.

"It's not the government's job to bail out speculators or those who made the decision to buy a home they knew they could never afford," Bush said in the Rose Garden. "Yet there are many American homeowners who could get through this difficult time with a little flexibility from their lenders or a little help from their government."

The U.S. economy enjoyed a strong revival in the spring but since then has been threatened by the worst housing slump in 16 years and a widening credit crisis that has sent financial markets on a roller coaster ride.

The president insisted that the economy was strong and could weather turbulence in the markets.

He said the mortgage market, especially the subprime sector, has shown particular strain. One of the most troubling developments has been an increase in adjustable-rate mortgages, which start out with low interest rates, then reset to higher rates after a few years.

"This has led some homeowners to take out loans larger than they could afford based on overly optimistic assumptions about the future performance of the housing market," Bush said. "Others may have been confused by the terms of their loan, or misled by irresponsible lenders. Whatever the reason they chose this kind of mortgage, some borrowers are now unable to make their monthly payments, or facing foreclosure."

Foreclosure and late payments have spiked, especially for so-called subprime borrowers with blemished credit histories or low incomes. Higher interest rates and weak home values have made it impossible for some to pay or to keep up with their monthly mortgage payments. Some overstretched homeowners can't afford to refinance or even sell their homes.

Mortgage foreclosures and late payments are expected to worsen. Some 2 million adjustable rate mortgages are to reset to higher rates this year and next. Steep penalties for prepaying mortgages have added to some homeowners' headaches.

Bush said the Federal Housing Administration, a government agency that provides mortgage insurance to borrowers through lenders in the private sector, would launch in coming days a program called FHA Secure. The program would let homeowners who have good credit histories but can't afford their current mortgage payments to refinance into mortgages insured by the FHA.

"This means that many families who are struggling now will be able to refinance their loans, meet their monthly payments and keep their homes," Bush said.

Bush also urged Congress to modernize and improve the FHA so more homeowners could qualify for the mortgage insurance provided by the agency. Last year the House passed legislation to modernize FHA, but Congress has not yet sent a bill to the White House. "I look forward to signing a bill as quickly as possible," Bush said.

Bush also pledged to work with Congress to reform a key housing provision of the federal tax code, which will make it easier for homeowners to refinance their mortgages.

"Let's say the value of your house declines by $20,000 and your adjustable rate mortgage payments have grown to a level you cannot afford," Bush said. "If the bank modifies your mortgage and forgives $20,000 of your loan, the tax code treats that $20,000 as taxable income. When your home is losing value and your family is under financial stress, the last thing you need to do is to be hit with higher taxes."

Bush also said the administration would launch a new foreclosure avoidance initiative to help homeowners figure out a way to refinance. He said Housing Secretary Alphonso Jackson and Treasury Secretary Henry Paulson would reach out to groups that offer foreclosure counseling and refinancing assistance for homeowners.

And he said the federal government was taking actions to make the mortgage industry more transparent, more reliable and fair to reduce the likelihood of these lending problems happening again.

Sen. Charles Schumer, D-N.Y., said he was pleased to hear Bush and Federal Reserve Chairman Ben Bernanke address the escalating crisis in the mortgage market. "The current situation is simply out of hand. It's bad and it's getting worse," he said.

He said Bush's proposals — increasing FHA loans, reducing down payment requirements on loans to be insured by the FHA, eliminating tax liabilities for foreclosure victims — were all Democratic proposals.

Schumer said additional steps must be taken — increased funding for non-profits that help people facing foreclosure to refinance, allowing Freddie-Fannie to spend more, federal regulation of mortgage brokers.

John M. Robbins, chairman of the Mortgage Bankers Association, said the president's attention to turmoil in the mortgage markets and the plight of homeowners facing foreclosure will help push Congress to reform FHA.

"It is essential that the Federal Housing Administration have the tools and flexibility to adjust its products and programs to meet the evolving needs of borrowers," Robbins said.

http://news.yahoo.com/s/ap/20070831/...aSGzYyvQGs0NUE

Our view on mortgage meltdown:
How did bundles of risky loans get 'AAA' ratings?
Wed Sep 5, 12:22 AM ET

Let's see, where have we heard this before? An industry that is supposed to provide independent financial analysis turns out to have a conflict of interest because it receives its fees from the very entities it analyzes.

Maybe it was the accounting firms that failed to spot the cooked books at companies like Enron and WorldCom. Or maybe it was the Wall Street houses that put out "buy" recommendations on wildly overpriced dot-coms that also happened to be investment banking clients.

Now, similar conflicts seem to be appearing at credit rating agencies such as Standard & Poor's and Moody's Investors Service.

Until recently, these agencies failed to see that securities consisting of subprime loans, made to people in debt beyond their means, might be risky investments, worthy of ratings that conveyed that risk. Perhaps the fact that the rating agencies get paid by the people who sell the securities, not the ones who buy them, had something to do with their myopia.

The mortgage meltdown is the latest evidence that America's reputation as a transparent, and relatively safe, investment haven is being put at risk by conflicts of interest and the quest for short-term profits. So much so that other countries — vulnerable to disturbances in the world's leading economy and distrustful of the loose U.S. rules — are demanding a role in regulating U.S. institutions.

Here in the USA, the impact is more immediate. Home prices are falling, and foreclosures are rising.

Whatever else is done to calm the markets, in the end everyone ought to be able to have confidence that a "clean" audit opinion, a "strong buy" recommendation or an AAA safety rating actually means something.

Today, the House Financial Services Committee is scheduled to hold a hearing on debt rating agencies with a view toward possible new laws and regulations. The Federal Reserve and the Securities and Exchange Commission are examining what steps may be necessary. And at least one state attorney general, Ohio's Marc Dann, is considering suing the industry.

Excessive regulation of financial markets is to be avoided. But the current system is akin to authors hiring their own book reviewers. What is needed is a less cozy relationship between the underwriters of mortgage-backed securities and the rating firms.

The rating agencies operate under a perverse incentive: If they don't give a high rating, the underwriter can take its business elsewhere in search of a more favorable one.

To be sure, the ratings agencies are but one player in the mortgage meltdown. Aggressive lenders and mortgage brokers helped put people in wildly inappropriate loans, some involving no documentation, or interest rates that skyrocketed after an introductory period. But if the ratings agencies hadn't greased the sale of mortgage-backed securities, the situation wouldn't have gotten so far out of control.

You don't need an MBA to recognize that bundling a lot of high-risk loans together doesn't produce a low-risk investment. Ultimately, what best serves people trying to sell something — be it a complex mortgage-backed security, shares of common stock or a tube of toothpaste — is the truth.

Unfortunately, investors have seen far too little of that.

Reliable ratings?

The leading credit rating agencies — Moody's Investors Service, Standard & Poor's and Fitch Ratings — use a grading system to help investors determine the risk associated with a company, security or market. The S&P scale:

Rating: Risk

AAA: Lowest

AA, A: Low

BBB: Medium

BB, B: High

CCC, CC, C: Highest

D: In Default

Source: Investopedia.com

http://news.yahoo.com/s/usatoday/200...6sqVq9V06s0NUE




[b]Opposing view: Don’t blame the raters
Wed Sep 5, 12:21 AM ET

By George P. Miller[/i]

In response to dislocations and losses in the subprime mortgage finance and broader credit markets, rating agencies have become a convenient target for criticism and blame. However, these views must be evaluated based on a practical understanding of the role the agencies play, how market participants use ratings, and the commercial incentives and regulatory constraints that govern rating agencies’ behavior.

It is critically important to understand what ratings do — and do not — address. Fundamentally, credit ratings are independent opinions of the creditworthiness of securities, reflecting qualitative judgments of the likelihood that investors will receive promised payments of principal and interest. To investors, the most important attributes of ratings are that they are accurate and reasonably stable. Credit ratings do not address changes in the market value of a security caused by market volatility, illiquidity or other non-credit related factors. The reality is that many recent losses in subprime mortgage financing vehicles were caused mainly by lowered market valuations produced by the combination of leverage and illiquidity, rather than bad (or misjudged) credit performance.

Regulators, market participants and the rating agencies themselves recognize that there is a potential conflict of interest inherent in a business model whereby issuers pay for ratings. However, it would be counter to rating agencies’ long-term business interests to sacrifice their independence and objectivity to obtain business from securities issuers or underwriters. Ultimately, rating agencies’ success depends upon the perceived accuracy, integrity and independence of their credit ratings. In the long term, this assessment will be made by investors and other users of ratings, not by issuers or underwriters. If investors lose confidence in ratings, rating agencies will cease to be commercially viable. This long-term business reality operates as a powerful disincentive to any short-term temptation a rating agency might have to issue artificially inflated ratings.

Notwithstanding their central importance in the credit markets, at the end of the day credit ratings are simply expert, independent opinions. Institutional investors use ratings as one of many indicators of likely credit performance. Investors typically perform their own credit analysis, sometimes reaching different conclusions. Rating agencies, along with other professional market participants, may well have misjudged the credit risk of some subprime mortgage securities. This is not surprising, given rapid deterioration in housing market economics. In response to this experience, the agencies are actively reviewing and adjusting the assumptions, models and criteria upon which their ratings judgments are based. Rating agencies are and should be held accountable for the quality and accuracy of their credit ratings. However, it would be inappropriate to hold them responsible for failing to anticipate adverse market liquidity, pricing and valuation trends that have also contributed significantly to recent market losses, and unfounded to suggest that their ratings are systematically biased as a result of their business relationships with issuers or underwriters.

George P. Miller is executive director of the American Securitization Forum, a trade association that includes credit rating agencies.

http://news.yahoo.com/s/usatoday/200...JNOZk0_Hms0NUE

Clinton Calls for Foreclosure Moratorium, Adjustable Rate Hold
By Kristin Jensen

Dec. 3 (Bloomberg) -- 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.

http://www.bloomberg.com/apps/news?p...CsERU&refer=us


The details of the Paulson plan are not quite clear yet, but he made general remarks this morning: http://www.whiotv.com/money/14758586/detail.html

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.

Paulson’s full remarks found here. http://www.treas.gov/press/releases/hp706.htm

I’ve made my views clear about the unfairness and the danger of Big Nanny meddling in the housing market–made all the more perilous in an election year. This is also a good question: http://www.sacbee.com/static/weblogs...es/009304.html

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.”

Washington once again delivers the message that responsible borrowers, responsible savers, and responsible homeowners are chumps. As detailed since last summer, both Hillary and President Bush continue their housing bailout crusades on parallel tracks. Both continue to deny that their bailouts are bailouts (just as amnesty wasn’t amnesty).

http://online.wsj.com/article/SB1199...googlenews_wsj

With public sentiment on the economy still sagging, President Bush will make a new push for congressional action to shore up the troubled housing market, a top aide said.

In an impromptu briefing aboard Air Force One as Mr. Bush returned from his Texas ranch, top communications adviser Ed Gillespie told reporters that the president wants Congress to do more to “help make the market more stable.” The administration sees “an opportunity for bipartisan consensus” on a housing initiative, despite the feuding that erupted last year between the Republican White House and the Democratic House and Senate over issues including the Iraq war, health care, and spending for parks and museums.


(“Bipartisan consensus” = Watch your wallets.) - JMHO


Mr. Gillespie and other aides didn’t offer new specifics for how Congress could address the housing problems. There are at least two significant pieces of legislation that Congress left unfinished last year. One would bring relief to more low-income borrowers, allowing them to refinance adjustable-rate mortgages through the Federal Housing Administration. A second initiative could help ease a credit crunch for many middle- and upper-middle-income borrowers, in part by allowing government-sponsored mortgage companies such as Fannie Mae to securitize more large loans. Currently, those companies can’t take on loans with values of more than $417,000. The administration supports a temporary increase in that limit but only in connection with comprehensive reform of the agencies’ oversight, including a strong regulator with authority to limit the size of the mortgage portfolios they hold.

A third possible element in a housing initiative would give states authority to issue more tax-exempt bonds to help troubled homeowners refinance their homes.

Last month, the White House announced a voluntary initiative that encourages mortgage-servicing companies to freeze interest rates for people with adjustable-rate mortgages who are running into problems as their rates rise. As many as 1.2 million homeowners with subprime loans, or those to borrowers with poor credit, theoretically could get either rate freezes or expedited refinancing.

But some observers expect the actual impact of that program to be more limited. Meanwhile, estimates of the overall number of homeowners who might go into default has risen to three million. That is creating a need for further help from state and local governments.

“Changing the tax code can also help state and local government do their part to help homeowners,” Mr. Bush said in December. “This temporary measure would make it easier for state housing authorities to help troubled borrowers — and Congress should approve it quickly.”

Christmas is over, but “Santa Claus politics”–as Thomas Sowell aptly puts it–is forever.

Darn!!! And here we are working and working to get our house paid off by ourselves, without help from anyone!!! Is there any end to the give away programs paid for with our tax money?

Soon, the majority of the people in this country won’t be paying for anything. We already have people declaring bankruptcy at regular intervals and squalling about not being able to keep everything they have bought that they don’t want to pay for, and now it’s going to be homes also.

Where does personal responsibility come in?