Financial Reform Watch

Obama Proposes Plan to Help Homeowners

Congress was out of town when President Obama unveiled his “Homeowner Affordability and Stability Plan” this week, but that has not stopped key Members of Congress from weighing in on the plan and handicappers from starting to take odds on how reaction to the plan will affect other issues at play in the Capital.

Unsurprisingly, Speaker of the House Nancy Pelosi (D-CA) applauded the Obama plan and promised more relief, saying,

“Congress stands ready to complement the Administration’s efforts by acting on Judiciary Committee Chairman John Conyers’ legislation to reform our bankruptcy laws, so that judges can modify mortgages and responsible homeowners can stay in their homes.”

The Conyers’ legislation would alter bankruptcy laws so that judges could reduce or “cram-down” the mortgage principal and/or payments on a borrower’s primary residence.

Just as unsurprising was the reaction of Pelosi’s counterpart, House Minority Leader John Boehner (R-OH) who, along with House Minority Whip Eric Cantor (R-VA), sent a letter to the president with a list of  “key questions” about the plan. Their questions are compelling regardless of where people stand on the plan.

  1. What can be done for the over 90% of homeowners who are playing and paying by the rules?
  2. Will the plan compensate banks for bad mortgages they should have never made in the first place?
  3. Will individuals who misrepresented their income or assets on their original mortgage application be eligible to get the taxpayer funded assistance under the plan?
  4. Similarly, will mortgage servicers be required to verify income and other eligibility standards before modifying mortgages?
  5. What will be done to prevent the same mortgages that receive assistance and are modified from going into default three, six, or eight months later?
  6. How do you intend to move forward in the drafting of the legislation and who will author it?

If one watches TV news and dips into the blogosphere it is clear there is an emerging— and possibly intense debate—that may affect congressional action on key upcoming legislation. Essentially, there appear to be two camps. In one are those who see the plan as much needed medicine for an ailment rotting away a major portion of the economy—the housing sector. In the second camp are people who see the plan as a giant giveaway from the 92 percent of people paying their mortgages on time and living within their means to the 8 percent of people who bought too much house and chose to live beyond their means.

It is important to note that the Obama plan can be implemented without congressional action, because it relies upon existing authority granted to the Federal Reserve and the Treasury through the TARP program. However, If the debate intensifies to the point where public opinion begins to turn against assistance for those the plan seeks to help, there could be ramifications on issues such as the "cramdown" legislation referred to above.

We will be following this debate with interest to see if it continues to heat up and what knock-on affects it has.

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Comments (3) Read through and enter the discussion with the form at the end
The "Clipper" - February 22, 2009 7:41 AM

I fully agree with Eric Cantor's questions. I have paid mortgages faithfully for years and now my wife and I, our children and grandchildren are paying for poor leadership in Congress, the foolish plans of Clinton and Bush and the "speculators" who didn't give a damn about paying off these mortgages but rather flipping their homes.

I know that the mortgage companies are to blame as well but net/net, these direct parties (borrower and lender) are getting away from an awful, calculated risk that my family is paying for.

This is stealing and should be introduced to the court system!

Nancy Pelosi is in the power position and pushing socialism. I vote Democratic and Republican and this is not a party issue. This is "honest" American versus "dishonest" American. These individuals who "played" the system are getting a "get out of jail card" at the expenses of the honest folks who don't want to greatly disadvantage their fellow man.

Cinton, Bush and Congress made the rules, the gamers made their money and the users got their homes at a radical discount versus the honest Americans. This government-approved (and re-approed) activity is a disgrace to the founding fathers.

Bill Carlson - March 19, 2009 5:21 PM

Look - - I too am ticked about helping people who got in way over their heads and the bankers and brokers who helped them. Most should fry. But the fact is, they are dragging us down. Their actions are causing the rest of us a lot of pain. Look at the price of real estate and the closed/downsized businesses.

If we don't take action NOW, we will continue to be sucked down the drain. We have to stop the sinking and get the economy stabilized. Businesses must continue to run, and they need credit to do it. If we don't bail out bankers there will be no credit. If there is no credit, companies go bankrupt and people are out of work. Out of work people can't buy things, so stores close. The employees and their suppliers are also out of work. And so on and so on.

It is possible that our entire economy crumbles - - Clearly a worst case, and I don't want us to get any closer to a Depression than we are right now.


Chris D. - April 16, 2010 12:41 PM

The recover process will be painful no matter what, but any relief should be fair to all citizens and not bankrolled by the ones who paid by the rules. In many cases the banks and investment firms have behaved criminally and need to be prosecuted as such. Every major decision has been made from a position of fear.It's as if we're treating a terrible illness with band aids because we can't face what will happen if we try to cure it.If a country's primary motivations are fear and greed, it's just a matter of time before it collapses anyway. Ask yourself how much longer you think the working people of this country can bear the burden of the corruption and greed on Wall Street and in Washington and how long it will be before the top 5% leave this mess behind and move offshore.

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