...and all it'll take is some money. (Which we'll get back, don't worry.)
Still Grudgingly President Obama is set to make a "major jobs" speech in September -- insiders expect him to be very much in favor of creating jobs -- but one Democratic Senator thinks that Obama ought to do something about the concomitant foreclosure crisis.
Senator Jeff Merkley, a Democrat from Oregon, has sent a letter to Obama urging that Obama do "something" to address the ongoing foreclosure crisis.
In his letter, Merkley specifically suggested three policies designed to curb foreclosures and applauded Obama for vowing to "go back to the drawing board" on housing policies which have failed to stem the tide of foreclosures since Obama took office.
... Among the policies Merkley advocate for was the "right to rent" proposal ... giving foreclosed families a right to rent their homes at market rates for several years after their bank seized their home.
Merkley also suggested implementing new refinancing initiatives for borrowers who owe more than their homes are worth.
(Source). Before Republicans/Racist Tea Partiers jump all over Obama for the foreclosure crisis, they should be reminded that
Foreclosures accelerated dramatically during the final years of the Bush administration.
(Same Source.) And before Democrats start to hope for much out of this, they should keep in mind that Merkley (who appears to disain email for things like this) wrote a similar letter before the State of the Union, a letter Obama ignored because Obama doesn't really want to be president anymore. (The way he gives in to the GOP, you'd almost think Obama is angling for a FOX commentator spot once his single term is up.)
Anyway, Merkley doesn't just misunderstand email; he misunderstands the role of a Senator, who, I'm reasonably certain, can introduce legislation even if Obama doesn't. And the article I read doesn't explain much about why Merkley isn't doing that -- rallying Senators and House Dems around a foreclosure solution that Obama could then sign into law. It isn't politics that makes our system unwieldy; it's politicians who don't understand how the system works.
The article also isn't clear about how "refinancing" options would work, and the "let's let people rent their houses for a couple years" solution is unpalatable because it doesn't address the value of homes, and it lets banks kick people out of houses based on questionable documentation and potentially-unconscionable loans made to people who had no business getting loans.
(You can quibble with that last point, but when companies like Countrywide were routinely lying to investors and the SEC and giving loans to almost any applicant regardless of credit, based on fraudulent applications created by Countrywide employees on a "stated income" basis known to be a lie, with the intent of selling those loans to other investors [again lying about the basis for the loan] and reaping millions off of the process, I think it's fair to say that the lenders themselves bear some blame for making those loans. If I lend you $200,000 knowing full well that you will not be able to pay me back, and I make up the numbers used to justify the loan, both of which are what happened, I don't feel as though the law should automatically reward me and punish you.)
A better solution is to do for homeowners what the government did for banks: Bail homeowners out, and make a profit -- and do it without using any government money.
Here's how it would work: Forget "HAMP," the failed program that Still Grudgingly President Obama doesn't want to fix. Instead, institute a new "Save Our Homes" Program, in which borrowers can get Paydown Mortgage Loans from one of two sources -- private lenders willing to make the loans, guaranteed by the government, or the government directly.
Every homeowner in the United States would be eligible for the loans, regardless of income. The loans would be available to a maximum of 1/3 of the total secured debt owed by a homeowner on his primary residence.
A homeowner who takes out a "Paydown Mortgage Loan" from a private lender would borrow money to pay down his current loans. The Paydown Mortgage Loan would be secured by a second lien on the property -- all lenders receiving funds would have to agree to give this loan second position -- and would accrue interest at a rate of 3% per year. No payments would be due on the loan until the house sells or the first lien is refinanced, at which time the entire balance must be paid off on the second mortgage.
If a private lender makes the loan, the lender will get 2% interest on the loan, with the government getting the other 1% -- but the government would guarantee payment and pay interest on the loan during its lifetime, just as it does with subsidized student loans. If the government makes the loan, it gets the 3% interest.
The government could also require that any bank which took TARP money accept a Paydown Mortgage loan as a reinstatement of any loans that are currently in default, and suspend the foreclosure process for any homeowner who submits an application. The applications would be granted to anyone who applies.
Simple, right? Guaranteed, right? It's essentially a TARP for Homeowners -- and it would work brilliantly, if you ask me. And such loans already exist on a smaller scale -- the SBA makes loans and grants, and groups like the Southwestern Wisconsin Community Action Program make loans like this for Wisconsin homeowners. The program would provide immediate relief on all levels: By paying down their mortgages by 1/3, homeowners could get current again on their loans (removing uncertainty from their lives and the housing markets) and by having no current payments on them, the homeowners would have freed up about 1/3 of their prior mortgage payments for other purchases -- while banks could generate 2% income, guaranteed, by making second mortgages.
So why doesn't someone propose this? Or do we just bail out banks now, Democrats?