Washington Unsheaths Sword Against Foreclosure

Posted in Foreclosure, December 7th, 2007 |

One can hear the clink of the sword – it is expected to be brandished any moment. The Bush administration has come to an understanding with jumbo lenders and a freeze will be announced for five years. These are the lines of expectation. No details are as yet available.

The reaction to the news in Detroit even without official confirmation is positive. At least the government is doing something. In Michigan the foreclosure problem is exacerbated with unemployment issues –7.7% unemployed. It is the highest in the nation. This point alone will determine how effective other palliative efforts on foreclosures will be. The problem is jobs. Let the people have jobs and foreclosures will automatically be arrested – is the view of many.
In Lansing the state legislature passed a law lowering fixed rate loans but it is unsure what its fate will be in the Senate. Lately Washington has been showing increasing interest. The Federal Housing Administration has been modernized. It can raise more amounts for lending purposes and stringent laws have been passed to rope in predatory lending. Democrat Debbie Stabenow from Michigan has brought another proposal for waiving taxes on those mortgages that are settled for less the original value of the loan. Stabenow rues the slow pace of action because it is speed that is of vital importance in this matter. The delay is also being questioned. Some want quick fixes while others decry hasty action might lead to more foreclosures. Republican Walberg voted against a law that would curb aggressive lending saying that this would result in less money being available for loans, which would have an adverse effect on the entire market. However he clarified that he was in general for regulating the industry. This is especially required in Michigan that has no controls over agents.

An appropriation bill is most likely to be passed for sanctioning $200 million to non-profit organizations engaged in foreclosure counseling. Counselors play a key role in resolving the delicate issue of bringing together borrowers and lenders to thrash out matters amicably.
Meanwhile everyone is waiting with bated breath for the final announcement by Bush. The President has always harped on the fact that the taxpayer’s money should not be used to bail out those who had made lousy loans. It leaves many questions unanswered – who are going to benefit and how are the lenders going to react?