Saturday, February 7, 2009

The Bill is Passed - No Relief for Homeowners

The Senate passed their version of the stimulus package which now has to be reconciled with the House's stab at it. All this means is that now the 2 branches of Congress have to see if they can agree on a compromise to each other's ideas on how to put money into the economy.

Startling... or maybe not... is the fact that there is no direct relief for homeowners facing foreclosure. Congress has not approved a change in the Bankruptcy law that would allow the Court to modify residential first mortgages. Further, they have not set up any new mechanism to help homeowners at risk of losing their homes due to adjustments in interest rates, or due to loss of jobs (3.6 million in 14 months), or for any other related catastrophic economic problem now facing a family in a house with a big "FORECLOSURE SALE" sign in the front (or back) yard.

John Olver, the Congressman for this District, a man who I admire and who has worked hard for his constituents, has said nothing. His office, specifically his Legislative Assistant responsible for the finance and banking portion of the Congressman's long list of pending issues, has not returned calls. There has not been a single press release dealing with what is being done to keep people in their homes, and to stop the slide of the economy caused by the acceleration of foreclosures and the resulting loss of value of other homes in the area. This also affects the value of the "Toxic Assets" called Mortgage-Backed Securities.

Until Congress addresses the housing issue in a meaningful way, and until the affect on the financial markets allows stability, we will be in this downward cycle that keeps gaining speed. in reality, Congress is faced with dealing with the symptoms, not the cause. Perhaps they believe that the bleeding must stop before the patient dies, and then they can treat the cause. Based on history, even if the hemorrhage abates, and the bleeding of the economy seems to get better, the cause is so severe (bad loans, lax regulations, fraud etc), that the patient (our economy) will die of complications: foreclosures; banks getting more and more property that no one can buy; no loans except to credit-perfect borrowers; and banks hoarding the cash they got from the government to make loans rather than lending money to help real people.

THERE ARE NO EASY ANSWERS. The only thing we do know is that normally you look for the cause of a problem and fix it/them one at a time. Here, home mortgage lending was the primary reason the markets crumbled and lending became a thing of fairy tales and nothing is being done to fix it.

One last illustration: HOPE NOW, a federally funded program to assist homeowners to save heir homes, which anticipated helping 400,000 foreclosure risks, has has TOTAL APPLICATIONS of 451 and has finished 25 loans. THE PROGRAM IS A FAILURE. What is being done to fix it?- Nothing!

Author's Copyright by Richard I. Isacoff, Esq February 2009

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