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twitterLETTER FROM WASHINGTON:
Dead in the water: Your bailout
Sorry homeowners, Congress — under pressure from banks — cut the lifeline that could have kept you out of foreclosure.
Sunday, May 3, 2009 | 2 a.m.
Chris Morris
Sun Topics
Sun Blogs
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- Housing help for Nevadans in budget bill (3-25-2009)
- Foreclosure option on rocky turf in Senate (3-17-2009)
- How Obama's mortgage relief plan pencils out (2-21-2009)
Washington — More than 38,000 Nevada homes could have been saved from foreclosure with legislation defeated last week in Congress — done in by the one-two punch of a financial services industry that continues to have enormous sway and lawmakers unwilling to sharply alter housing policy, even in a crisis.
Lenders refused to support legislation to allow bankruptcy court judges to modify the terms of residential mortgages, a power they hold over mortgages on vacation homes — even yachts. But primary residences have been off limits.
The White House promoted the bill as an incentive in President Barack Obama’s housing rescue plan. The idea was to nudge lenders to rework loans before homeowners had to resort to bankruptcy. Critics say lenders are not doing enough to rewrite troubled mortgages.
“I hope the banks are proud of themselves,” said Senate Majority Leader Harry Reid, D-Nev., who supported the bill. “What they have done to our country. And now they are standing in the way of our trying to help a little bit, trying to help people who have a home and they cannot get any relief.”
A report from economist Mark Zandi at Moody’s economy.com says 1.7 million foreclosures nationwide could have been prevented.
Banking giant Citi backed the provision. But others in the industry warned the legislation would make home buying more expensive as bankers recouped losses by raising interest rates and requiring larger down payments. Loans on vacation homes, they argue, command higher interest rates in part because of the bankruptcy option.
The industry says it is rewriting loans at a brisk rate — though admittedly not keeping pace with the 8 million expected foreclosures in the next several years. Its Hope Now program is reworking about 116,000 loans a month nationwide.
The clout of the banking industry surprised many observers here. Wall Street gets no love these days as the nation reels under the Great Recession. Fewer than 5 percent of Americans hold the Street in high regard, according a recent poll.
“The banks have enormous influence,” said Ellen Harnick, senior policy counsel at the Center for Responsible Lending, a consumer advocacy group.
“It’s important for taxpayers to understand: The bankers who have received enormous help from taxpayers have not been willing to support what would have been an extremely helpful change in the law that would have prevented foreclosure.”
The banking industry spent tens of millions of dollars lobbying Congress in the past year. Some banks receiving bailout funding spent a combined $76 million on lobbyists last year and others contributed $37 million to congressional campaigns, according to the Center for Responsive Politics.
But that is only part of the story.
Despite Democrats’ enhanced majority in the Senate, made even greater last week when Sen. Arlen Specter of Pennsylvania switched parties, they couldn’t seal the deal.
Twelve Democrats voted against the amendment that Reid’s No. 2 man in the Senate, Assistant Majority Leader Richard Durbin, had pushed for years. The bill found only 45 supporters, none Republican. Nevada Republican Sen. John Ensign voted no.
The bankruptcy provision would have been especially important in Nevada, where half the borrowers are underwater — meaning their homes are worth less than the amount owed on their loans.
Nevada homeowners with substantial negative equity are unable to qualify for today’s lower interest rates through the Obama plan. The president’s plan requires that loans backed by Fannie Mae or Freddie Mac be no more than 5 percent above a home’s value to qualify.
The financial firm First American CoreLogic reports that 170,000 mortgage holders in Nevada owe more than 25 percent above their home’s value. In a state with a jobless rate now higher than 10 percent, bankruptcy may be the option of last resort for those cases, experts have said.
The House passed a similar bill in March on a party-line vote. Democratic Reps. Shelley Berkley and Dina Titus voted in favor. Republican Rep. Dean Heller opposed.
Scott Talbott, chief lobbyist for the Financial Services Roundtable, said the bankruptcy provision could have allowed virtually any homeowner to stop paying the mortgage, file for bankruptcy and get a lower payment.
“The guy next to you could get a deal just by claiming bankruptcy,” he said. “Is that fair?”
That’s a strong argument these days. Remember the populist outrage sparked when the cable TV commentator ranted about taxpayer bailouts for undeserving neighbors? A similar populist anger has not materialized for vacation homeowners going to bankruptcy court.
“In trying to help the small minority of people who unfortunately are in bankruptcy, we can’t raise the cost of housing on the 95 percent of people that will never have to suffer that experience,” said Sen. Evan Bayh, the moderate Indiana Democrat who tried to broker a compromise. He ultimately voted for the legislation.
Bayh and Specter had floated a proposal to limit the bankruptcy option to just those borrowers with subprime mortgages, the instruments at the root of the housing crisis. Several senators expressed support for this and the industry seemed receptive.
But Durbin had little interest in brokering such a deal. The Senate version had been pared back. Limiting it to subprime might have worked last year, when the Senate first tried unsuccessfully to pass the bankruptcy provision, but the housing crisis has now spread beyond subprime borrowers, his backers said.
After the legislation failed, the Obama administration issued a statement saying it “supports appropriately tailored bankruptcy legislation to provide a mechanism for homeowners who are out of other options” and looks forward to continued work with Congress on the issue.
Discussion: 29 comments so far…
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People don't need that legislation. While it would help, the fact is there is much other aid out there. People really need to take advantage of the aid out there, from Citigroup, Fannie Mae, The federal gov't FHA, many states, JPMorgan Chase, Wachovia, and Bank of America/Countrywide have committed to helping over 7 million homeowners between them keep their homes. I found more info on the programs here.
http://www.needhelppayingbills.com/html/...
Congress got there pay raises, while working people continue to get thrown out in the street! The American Revolution Part 2 is coming!
No principal writedowns or cramdowns, period. You bought it, you can't pay, you give up the house. That's it.
"I hope the banks are proud of themselves," said Senate Majority Leader Harry Reid, D-Nev., who supported the bill..."...now they are standing in the way of our trying to help a little bit, trying to help people who have a home and they cannot get any relief."....REGARDLESS of the merits of the legislation, the Senate MAJORITY 'leader' has again abdicated responsibility...vote, Mr Reid...bankers don't have a vote - you and your colleagues get the votes on legislation...jeeesshhh, amazingly 'in-your-face' irresponsible and totally disingenuous...
"Some banks receiving bailout funding spent a combined $76 million on lobbyists last year and others contributed $37 million to congressional campaigns, according to the Center for Responsive Politics."
Congress bends to the will of lobbyists plain and simple. This past week we have seen one man's pathetic attempt to keep his power and have been reminded that it is the 40,000 registered lobbyists that make policy in Washington. Congress needs a house cleaning. I don't know what the answers are but I think it starts with term limits. Once you are in a situation where your focus isn't keeping power for as long as you can, perhaps you will do what is best for your country and not hold your prioritys as:
1) personal power
2) party
3) country
The most troubling thing isn't Congress' cowardice on this bill. No, more troubling is what this signals about banking and financial reform. Capitalism is a wonderful thing, but the nation's history demonstrates that it must be regulated. Congress is supposed to impose new controls on a system gone amuck. This vote shows that legislators remain in the thrall of the industry. Populism can be a dangerous thing. But we need more, now. Pitchforks anyone?
Face it folks, all the bail-out money did was allow the 'haves' to have MORE and the banks to be able to stay open to continue screwing their customers royally. The government should have bailed out the homeowners not the banks. This money that was supposed to help people only helped those who have more in their pockets already than most of us will see in a lifetime. That's the way of corporate america because only the rich can afford to get themselves elected to 'run' our country. And face it further - it aint ever gonnna change - at least not in my lifetime.
u will see large amount of forecloser, and large amount of bankruptcy i will be there filing for bankruptcy
What the hell is Reid whinning about? He's the one who drafted the bailout for the banks.
You forget the individuals. How about someone that sold property and took back a second deed of trust. Why should the Congress tell someone they can keep the house and pay less and the guy carrying the second it's just too bad.
Democrats in Congress seem to want to spend money that belongs to others. They see nothing wrong with giving away "other peoples money".
The Nevada Legislators are also stripping homeowners of their rights to own a defective free home and have builders repair that home. SB 337 and 349 will strip NV homeowners of all their legal recourse. Speak out now, before it's too late. http://democracyrocksinnevada.org and http://lasvegaslemonade.org
The double whammy upon American taxpayers' will occur when/if the economy begins to recover with an over abundant supply of American dollars, it is known as inflation.
A quick glimpse of aid provided annually to non-Americans throughout the world by Congress.
Official Development Assistance (ODA) is basically aid from the governments of the wealthy nations, but doesn't include private contributions or private capital flows and investments. The main objective of ODA is to promote development. It is therefore a kind of measure on the priorities that governments themselves put on such matters. (Whether that necessarily reflects their citizen's wishes and priorities is a different matter!)
The United States tops net ODA 2008 contributors at over 25 Billion USD, with Germany the next largest dollar contributor at approximately 12.5 Billion.
Top ten recipients of Gross ODA from the U.S. (USD millions) 2006-2007
1. Iraq 4,266
2. Afghanistan 1,459
3. Sudan 725
4. Colombia 562
5. Egypt 541
6. Nigeria 514
7. Congo. Dem Rep. 486
8. Pakistan 465
9. Ethiopia 344
10. Kenya 304
I'll reserve judgment of such aid for fellow Americans to decide.
http://www.globalissues.org/article/35/u...
When the government bailed out the auto makers the President told them how to run their business, even getting rid of a CEO.
When the government bailed out AIG the President and Congress told them you can't waste taxpayers money on a trip to Las Vegas.
When the government bailed out the banks, did the President or Congress tell them you can't waste tens of millions of taxpayer dollars on lobbyist giving taxpayer dollars to politicians to get them to act like their puppets? Of course not. The country voted for change, at least that what we hear time and time again. When it comes to politicians doing the right thing, there has been and will be no change at all.
Corporate America owns the Feds....
Once again, Sen. Reid chokes in the clutch. Far from being the "giveaway" bill it is portrayed by the banking industry's lobbyists (and what Lenin would refer to as their "useful idiot" allies in the Republican and Democratic parties) the measure would have allowed the orderly workout of these loans through a transparent, public procedure--i.e. bankruptcy court.
Oddly enough, the real reason the banks are against reform is not because they worry it will impose higher costs on consumers (because, after all, when did a bank ever worry about that?) but because it will force them to realistically value the dud loans on their books. At the moment, the banks can set relatively optimistic values on those bad loans based on the expectation the market will someday recover and on the assumption that there's no market for these loans. Of course, if the loans are getting written down to 25 cents on the dollar in BK court, that assumption fails and the banks' Tier 1 capital will take a major hit.
MORE FORECLOSER MORE BANKRUPTCY AND LAS VEGAS IS TAKING A S(((
For those of you who think that there is help for homeowners out there, snap out of it and look at reality rather than press releases, news headlines, and titles on legislation. Very, very few homeowners are getting modifications. Of those that do, most cannot make the loan terms as modified. The rest will be in hock all their lives, as most mods involve extending the mortgage term to 40 years, and giving up any chance at equity for retirement.
Meanwhile, the banks keep foreclosing, which drives more folks into negative equity, reduces their ability to lend and increases their claims on the taxpayers through AIG's credit default swaps.
Until the foreclosures stop, the Great Depression II will continue to gather downhill momentum.
The American Revolution II will again allow THE PEOPLE to own the Feds.
Harley, the United States spends more than all that combined on US farmers to prop up food prices, which not only hurts poor Americans but poor people all over the world.
Then we turn around and tax other Americans to pay for food stamps for our poor to afford the artificially high priced food.
As for home foreclosures, look for more once we get the new tax increases as companies fire more people and unemployment rises.
Nevada's policy of trying to be slightly better than California has finally backfired, there are other options and people are moving where the jobs are.
The feds spend money on farmers so they stay growing food. Farming is the only business when in a matter of minutes you can be wiped out for years. While the shelves of our grocery stores are overflowing, a good part of the world is hungry and getting hungrier. The countries that support their farmers are the ones that are never hungry. If you think the farmers are on the "dole", it's time you traded in your pinstripes for a pair of bib overhauls and learn first hand what an honest days work really is. I live in farm country and I can say for sure that farmers are not driving Porches, Mercedes, or Ferraris like those Wall Street thieves who make huge fortunes trading food and energy futures. Food in this country is expensive compared to what? If you ever took the time to find out what goes into the growing, processing, and transportation to market of food you would know what a bargain our food and most of the goods and sevices in this country really is.
Went shopping a few hours ago. Wanted to let you in on the "terrible" prices I had to pay for food. $1.99 for a gallon of 1% milk. 99 cents lb for apples. 99 cents 1 lb loaf of bread. 39 cents lb for baking potatoes. $1.99 for 1 lb butter. $1.36 for 18 large eggs. Plenty more where those came from. All fresh first quality food purchased at the local supermarket that's bigger than a super Wal-Mart but isn't. I've purchased food in Vegas so I know these same items are more expensive there. But what do you expect? You live in a big city in the middle of the desert. If I had your address Patrick a I'd send you the receipts. For less than you would pay for a shot and a beer I could eat pretty good for the whole day.
The moratorium on foreclosures is up and house prices will lower to a level where they should have been in the first place. To the people that paid too much, sobeit, you should've done your homework in the first place. Anyone who paid more than $80.00 a square foot for tract home created their destiny and helped create this economic disaster. Quit whining!
I am in the construction business and have built many homes for myself and I find it amazing how much the developers and property owners made during the boom, it is ridicules. BLM prices at auction, what a joke yet developers paid $500,000.00 plus per acre, get real and follow the money. Developers sold tract homes for $200.00 to $400.00 a square foot and you the consumers paid. Where did the money go, Developers, RE agents and Brokers, Lenders, and anyone else who had their money grubbing fingers in the pot.
We're not a nation of being broke. The money is still here, it is just being rat holed by the very people who sucked the system dry and they're waiting on prices to lower to a level where they should've been in the first place and they'll reinvest to make more money. Welcome to America, I love the system it does work.
Odeman: What grocery store are you shopping at??
If the banks want it this way, well it is time to stop paying the mortgage.
The banks flooded the market with easy cash because they wanted to sell ARM backed securities to rich people/gov'ts. That caused the bubble, not the home buyers.
If the banks want to play chicken, then they can have the properties back. Without an incentive to get the banks to start modifying mortgages to a reasonable and affordable amount, the banks simply won't modify the loans of anyone stupid enough to keep paying them.
So you can be a bag holder, and get driven into bankruptcy trying to hold onto the home, or walk away and let the weasels have it back.
I can rent a home in LV right now that is twice the square footage of the one I am on the hook for, at half the price of my mortgage.
Screw the banks, I am done with them. And those 11 fake democrats that voted against this (especially that wolf in democratic clothes Specter) need to lose in their primaries next time around. They are traitors.
I,m a carpenter.I started building homes in 1972. That was in California. I saw the market take a nose dive around 1979.Whats happening now is not new.It seems people are just as greedy as ever.I don,t see how you can point the finger at all.You should know what the risks are when you sign.Nobody get,s rich building tract homes.The price paid per square foot to build these dumps has not increased since 1980!There is no quality.Just hurry up it,s sold. And the consumer will just pass the dump off on some other poor sucker after making a profit.People only start crying after its too late.I can remember when people took pride in their work,Knowing some one whom you would never see would admire you,re work.Now it,s all about the money.It,s not just housing look around. We as a people need pride back in our lives.To heck with these crooked politicians,when could you ever count on one? We the people are the largest group yet we can,t seem to get it together.Maybe someday.....
If you could afford the house payment when you signed the loan (assuming a fixed rate) then you can afford it now, probably even more so. Just because the value of your home goes down is no reason for you to have a lower payment. Congress got it right on this, tough cookies. They should never have bailed out the mortgage companies in the first place.
If you took out an ARM thinking you would flip the house before the reset, again, tough cookies. You took a risk and lost.
Beyond that, whoever hasn't been covered by the above and is in trouble probably should never have been given a loan in the first place and being too stupid to realize that a loan was not deserved speaks for itself.
I'm not particularly fond of 'bailing' anyone out be they banks or homeowners alike but since that train has passed us by and the bailout money has already been doled out to the banks the least they can do now is use it as intended - which, correct me if I'm wrong, was intended to HELP THE AMERICAN PEOPLE.........or was it for bonuses, vacations, lobbyists ??
judgesmales you wrote...
No principal writedowns or cramdowns, period. You bought it, you can't pay, you give up the house. That's it.
Well I say to the banking industry that needed MY money to bail them out...
NO BAILOUT!!! YOU GIVE IT UP!!!
That's it.