When the Government released their plan, which is intended to help a projected 9 million homeowners prevent foreclosure, I was very skeptical that it would actually work.  

The trend with our Government is to release all of the media sound bites concerning the solutions that they are coming up with to fix the crisis.  However, when you read the fine print of the solution, you quickly realize that there is no solution and that all of those political “sound bites” were nothing but talk.  

The politicians follow a strategy.  They always look like they are doing their job to protect and help the American people. They hold press conferences telling you all of the wonderful things that they are going to do.  Then they go so far as to pass legislation, create new programs, and sign new laws.  Unfortunately, these wonderful “solutions” are nothing more than window dressing.  The only people that they protect are the ones who donate to their political campaigns.  

All you had to do was read the fine print of the mortgage modification program to know that there was no way that they were going to help 9 million homeowners.  This plan was projected to cost 75 billion dollars.   

Law Professor Alan White came up with some interesting statistics.  His analysis shows that mortgage modification was actually down 11% in May.  If the plan was working, wouldn’t we be getting more of these plans done each month?  

In May there were 32,267 foreclosed properties and only 19,041 mortgage loans modified.

The statistics get even better.  His analysis shows that 27% of the loans modified caused the payment to increase rather than decrease.  The reason that homeowners need their loans modified in the first place is because their payments are too high.  

If you read the fine print, you will realize that there are 100,000’s of Americans that cannot even apply for the program.  Dick Morris reports a disturbing list of reasons why you cannot even qualify:  

     -You have lost your job;

     -You owe more than 5 percent above what your house is worth;

     -You are already in default;

     -You have not yet missed at least one payment;

     -Your lender does not want to participate;

     -Your mortgage is not one of the half of all mortgages insured or owned by Fannie Mae or Freddie Mac;

     -The reworked mortgage payment would come to more than 31 percent of your income;

     -Your mortgage is over $759,000;

     -The home is not your primary residence.

What is the Government’s solution?  Well like everything else that they do. They hold press conferences, tinker with numbers, and tell you what they want you to believe.  There is nothing that a good Public Relations Campaign can’t solve.

Statistics Source:  Dr. Jerome Corsi read his articles on www.worldnetdaily.com   

Tags: Bob Brooks, crisis, Deceptive Money, Dick Morris, Dr. Jerome Corsi, Foreclosure, Government, Homeowners, loans, loans modified, mortgage, mortgage modification, politicians, Prudent Money

I learned of this through my interview with Michael Sichenzia.  He said that it is critical to follow up and make sure that your file is being reviewed.  He also said that it is much tougher to go through this process on your own.  His firm assists homeowners with this process and has a good success rate.  I believe that the price for the service is $550.  If you want to talk to Michael about his program and get his assistance in the entire process, he can be reached at 1-866-596-0337.  Although it might be tough to come up with $550, having the peace of mind of letting a professional handle it does make a lot of sense.  If you want to do it on your own, copy and paste the form below, fill it out, and fax to your lender.

 The form can be found here – you can copy and paste the form or duplicate the wording yourself.  It is just a template of the letter Michael uses.  For full disclosure (and Michael does disclose this in all of his work), Michael was convicted for securities and mortgage fraud.  This is a well known fact. Since his release from prison, he has been on a crusade educating people on mortgage fraud and scams.  He has made this his life mission.  In my dealings with him in interviews, I have found nothing that makes me question his integrity.  There are probably more scam artists in the loan modification business than ethical people.  You have to be very careful.

Tags: Bob Brooks, Deceptive Money, Homeowner and Stability Plan, loans, Michael Sichenzia, modified home loan, Mortgage payments, Mortgages, Obama Administration, Prudent Money

Many radio listeners have inquired about the request letter for the Government home loan modification program.  If you send this letter into the bank, by law they have to stop any foreclosure proceedings while they review your application for the Government program.  I finally received the letter.   The blog is written.  It will be proofread tomorrow morning and posted probably no later than 9 am.   Thanks for your patience.

Is Obama’s bail-out plan for homeowners helping?  It is tough to keep up with all of the bail-out programs.  As a refresher, this plan was put together to provide incentives to homeowners and to banks for modifying loans.  In this blog, you can read all of the details.

It is really up to the banks to participate and apparently banks are giving the Obama plan a real “thumbs down”. Now keep in mind that many of the main banks postponed the foreclosure process to help homeowners in distress.  The latest foreclosure numbers show a 24% increase in the first quarter of this year.  From March’08 to March ‘09, there was an increase of 46%.  It doesn’t sound like the homeowner is getting the bail-out.

On my stock market outlook blog, I wrote about some statistics in John Mauldin’s newsletter.  John Mauldin writes that there are reportedly 600,000 repossessed homes held by banks that are not even accounted for in the statistics.  There are numerous reasons why this is the case.  Banks don’t want to take the losses.   

Then there is the other challenge with Obama’s plan.  Banks do not have the capacity to handle all of the people who want to modify their loans.  Apparently homeowners are staying on the line for an hour at a time and getting transferred from one line to another and never reaching a live person.  Meanwhile foreclosures are continuing to escalate and homeowners feel defeated.

Tags: Bob Brooks, Deceptive Money, Foreclosure, Homeowners, John Mauldin, loans, modifying loans, President Obama, Prudent Money

In a shocking news story that is just starting to circulate, the country’s debt problem is much worse than anyone thought.  It is well known that we are the world’s largest debtor country.  If we are in that much debt, what do we really own?  How about actual ownership of the White House?  The report states that President Bush actually signed for debt against the White House in an effort to finance special interest type projects rather than sending them through Congress.  This has scandal written all over it. 

Read this disturbing article and learn more – White House Faces Foreclosure

Between bank bail-outs, homeowner bail-outs, and now potential auto bail-outs, the government has done everything humanly possible to make sure that the system doesn’t go into the tank.  How are they doing?

Let’s start with the TARP (Troubled Assets Relief Program)

The panel that overseas the Treasury Department Bail-out is expected to release a not-so-flattering report concerning the Government’s handling of the bail-out.  

In the report, there are 10 questions to Treasury.  Some of the questions address the lack of a clear strategy, lack of accountability, and why nothing has been done to prevent foreclosures.  They even question whether the money that was just given to banks was a giveaway or a fair deal.

This comes at a particularly tough time for the Treasury, seeing that it has to go to Congress to get the other $350 billion dollars of TARP money.  

Foreclosure Prevention Programs

Top US banking regulators said that some of their foreclosure prevention programs are floundering and that they have no agreed plan for the future.  More than half of the homeowners who have participated in these programs, which resulted in lower payments, are still in danger of foreclosure.  This is just 6 months after first participating.

I don’t know why this is such a shock.  First, mortgages are contracts and difficult to rework.  Second, most people have home values far less than what they owe and see it better to walk away then to stay.  Third, the consumer is in a bad place financially today and even a lower monthly payment would not help.  

Auto Bail-out

An agreement has been reached and now has to go to vote.  This is where the difficult part starts.  There is a good chance that this proposal to loan the auto industry $15 billion will not pass.  Republican politicians are going to be very difficult.  Failure of GM receiving money will bankrupt the company.  Bankruptcy would potentially be the death blow to this company.

Tags: bail-outs, banking regulators, bankrupt, Bob Brooks, Congress, Deceptive Money, Foreclosure, Government, Homeowners, John Thain, Merrill Lynch, Mortgages, Prudent Money, socialism, TARP, treasury, Treasury Department Bail-out

“Worst of US Housing Slowdown is Over” – Greenspan – February 14, 2007

“Fed Doesn’t See Sub-Prime Mortgages as Threat.” – Wall Street Journal – March 1, 2007

“More conclusive signs of pending home price stability are likely to become visible in the first half of 2009.” - Alan Greenspan – October 10, 2008

Well, Alan Greenspan thinks that a housing bubble where an estimated 12 million  homeowners owe more than their home is worth (Goldman estimates that will go as high as 30 million), a credit market that is in crisis, and country with no confidence level, is going to firm up as early as the first half of next year.

Of course, this is the same individual that headed up our Federal Reserve Board, and said that sub-prime would not be a problem and predicted that the worst was behind us months before things just started to get really bad.

This is also the same individual who suggested that adjustable rate mortgages were a great idea and that everyone should consider them.  Adjustable rate mortgages are the key ingredient in most home foreclosures. 

It is so difficult to take anything seriously from individuals who were/are elected to office.  Politicians (and I consider Former Fed Head Greenspan one of them) have really let this country down.  It is too bad that we are probably going to get 4 more years of the same.  

I think I would feel better if Mr. Greenspan suggested that this was going to continue for much longer.  

Tags: Alan Greenspan, Bob Brooks, credit market, Deceptive Money, Homeowners, Housing bubble, Housing Bust, Prudent Money, Wall Street Journal

The bailout of mortgage giants Freddie Mac and Fannie Mae was the news today.  This was a historic move designed to shore up the financial markets and improve the mortgage markets.  I talked about this today at length on my radio program. 

Unfortunately, this was necessary.  You wouldn’t have wanted to watch the complete meltdown of the US financial system in the event that these two companies went under.  Incidentally, if they weren’t insolvent, they were very close to being insolvent.

It did have a big impact on mortgage rates today.  Mortgage rates fell by 0.5%.  However, this deal has a bad side to it.  They are making the assumption that this foreclosure crisis is going to get better.  The two mortgage giants hold trillions of dollars of loans.  If a good percentage of those loans go bad, we as taxpayers are going to pick up the bill. 

The foreclosure crisis is not getting better and I would suggest that this bailout does very little in the way of fixing the problem.  Consider these stats:

The Mortgage Bankers Association reported that more than 4 million American homeowners with a mortgage, a record nine percent, were either behind on their payments or in foreclosure at the end of June.

Almost one-third of US homeowners who bought in the last five years now owe more on their mortgages than their properties are worth.  Second-quarter home prices fell 9.9 percent from a year earlier, giving 29 percent of owners negative equity.  For those who bought at the 2006 peak of the housing market, 45 percent are now underwater (meaning the homeowner owes more than it is worth).

– Bloomberg  

The New York Times has reported that “homeowners with good credit are falling behind on their payments in growing numbers, even as the problems with mortgages made to people with weak, or subprime, credit are showing their first, tentative signs of leveling off after two years of spiraling defaults.

“The percentage of mortgages in arrears in the category of loans one rung above subprime, so-called alternative-A mortgages, quadrupled to 12 percent in April from a year earlier.  Delinquencies among prime loans, which account for most of the $12 trillion market, doubled to 2.7 percent in that time.” – The New York Times

The problem is still there.  This should help a little and more importantly help keep us from a financial meltdown.  However, this should also act as the final major bailout performed by the Fed.  Thus, the banks and institutions that are as bad off as the two mortgage giants were are not going to be so lucky. 

Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.

Tags: creidt, Deceptive Money, Fannie Mae, Foreclosure Crisis, Freddie Mac, Government Bail-out. Bob Brooks, loans, mortgage, Mortgage Bankers Association, mortgage rates, negative equity, prime loans, Prudent Money, taxpayers, US financial system

Well our politicians are diligently trying to make voters believe that they are working to fix the foreclosure problem in America. There is a version of a bill making its way through the system right now.

Now, let’s assume that Congress is going to pass something that will actually help homeowners and help bail them out. Thus far everything that they have done has been somewhat of a joke. It has been all headline and little substance.

Let’s pretend that they are really going to do something that can bail out people in mass quantity. Do you think that is the right thing to do?

One argument says no! The taxpayers shouldn’t have to pay for a person’s decision to sign off on a loan that they knew going into it would be a problem some day and or a house they couldn’t afford. What about the people who have already gone through foreclosure?

One argument says yes! If the government doesn’t do something, this is going to hurt everyone. The consequences will be way too tough on the economy.

My opinion?

First, there is a subset of people involved in this problem that were dealt with fraudulently in the process of obtaining a loan. Although they still signed the dotted line and should have known what they were signing, they were treated in an unethical/fraudulent manner.

This problem has to work itself out without Congress intervention. It is the healthiest thing long-term for our country. Congress just makes a problem bigger in the future by continuing to try and intervene. The taxpayer in either case is going to get hit for this problem. The unintended consequences of this type of intervention could end up being as bad as letting the problem fix itself over time.

The best course of action for our future is to let this problem correct itself. Regardless, it is going to probably be a long time before any type of bill gets passed. By then, the problem will already be way past the point of intervention having a positive effect. We are currently experiencing the highest amount of mortgage resets. The problem will start to diminish towards the end of the year.

The problem is already here and facing millions of Americans. The Titanic is heading for the iceberg. The saddest part of the whole story is that our politicians let this happen on their watch. You could see this problem coming from a mile away. No, it is not hindsight. Loans that are written on 105% of the home, at interest rates that are going to adjust, low initial payments, no documentation closes, etc. have a high probability of crashing.

These were loans written for more than just people with bad credit making this much bigger than the advertised “sub-prime” problem.

What is your opinion?

Tags: bad credit, bail-out, Bob Brooks, Congress, Deceptive Money, Foreclosure, Government, Homeowners, loan, mortgage, politicians, Prudent Money, taxpayers

“If you elect me as your President, I will just make all of this foreclosure mess go away. I will outlaw foreclosure and let everyone live in their homes for free. Better yet, we will just forgive all of that mortgage debt.”

What is the difference between the campaign promise above (admittedly ridiculous) and the ones that the candidates are promising?

This is a hot campaign topic. High gas prices, recession, etc. are not even a worthy component to this problem. Foreclosures are on the rise and every candidate is hoping to convince you that they are going to fix the problem.

The most ridiculous (besides my own campaign promise mentioned above) is from Senator Clinton.

Here is a look at her proposal (provided by the Dallas Morning News):

· Provide $30 billion for state and local governments to stem foreclosures with counseling, refinancing assistance and purchase of foreclosed properties.

It is estimated that 730,000 homes are already in a short sale or foreclosure situation. With almost 1 trillion estimated loans set to reset in the next year or so, $30 billion is nothing. You can counsel someone all day in a foreclosure. If the credit is bad and there is no equity in the home, the train has left the station and there is nothing anyone can do.

· Ask lenders to freeze interest rates on resetting mortgages for five years and halt foreclosures for 90 days.

Excuse me for a second as I gain my composure from laughing. Clinton needs to fire whoever said that was a good campaign promise. As an attorney, she should know better that you cannot just arbitrarily change a binding contract without enormous repercussions.

· Allow the FHA or another government agency to purchase mortgages and restructure them if the crisis worsens.

You cannot just let the Government pick up the bill for everything.

Barack Obama:

• Provide $10 billion to support victims of mortgage fraud and help homeowners modify loans.

At least Obama knows that this is a ridiculous campaign promise by just throwing a dog the bone with $10 billion.

• Offer a 10 percent universal mortgage credit to homeowners who don’t itemize on taxes.

What???

Then there is Senator McCain:

· Expand the Federal Housing Administration to help 200,000 to 400,000 homeowners refinance into viable mortgages.

This is all we need – four more years of Bush politics. Don’t worry, the Government will just pick up the tab. We can just “print” our way out of this problem.

I realize that politics are politics and none of this is too surprising. I just wish that we had politicians that could offer a dose of reality, real solutions, and the appearance that they really do understand the problem.

Is there a fourth choice?

Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.

Tags: Bob Brooks, Deceptive Money, Foreclosure, Government, high gas prices, interest rates, modify loans, mortgage debt, mortgage fraud, politics, President, Prudent Money, recession, refinancing, Senator Clinton

Yesterday I talked about one aspect of a weak plan from our politicians in Washington to save the homeowner from foreclosure. It was a big benefit for big business and little for the distressed homeowner. Now Representative Barney Frank has his ideas on the table to help the homeowner.

I can sum up this latest attempt to help homeowners. The bottom line is that Congress has to APPEAR that they are solving the problem. Politics are all about appearances. Are they really helping anyone? Well this latest idea (read: political spin) has the three qualities that stand out in most political solutions.

First, it is too little too late. By the time this or any other piece of legislation actually gets passed, the bulk of people in trouble will have already been failed by the current system. Second, the plan has headline grabbing details. Reading the details of this plan leads a person to think that Washington is really helping people. Third, it is a plan that helps a very small percentage of people.

The plan is set up for the FHA to, in a sense, buy mortgages from banks from struggling homeowners, readjust their payment, and then the government would share in any gain that the homeowner receives after the sale of the home.

Of course, the bank has to agree to take a loss on the mortgage and forgive some of the debt. It is not clear as of yet whether the homeowner would take a tax hit on the portion of the loan that was forgiven. As of today, the homeowner would pay federal income taxes on any portion of a loan that is forgiven.

We could walk through the details of the plan. However, it is not necessary. I will just tell you the political headline and then the few pieces of this legislation that assures only a very small percentage might be helped.

In an article written about the newest round of legislation it says,

“Frank’s bill would allow a whole new swath of homeowners who are currently too financially strapped to qualify for a government-insured loan to do so. That includes people who are badly behind on their mortgage payments, have poor credit and hefty debt, and those who owe more than their homes are worth.”

This is the best part of the “solution.” They will only re-finance up to 90% of the home value. Let’s see, most of these people who are in trouble borrowed close to 105% of their original home value. You factor in a 20 to 25% decrease in value. You can do the math.

This plan will only help those who actually have equity in their homes. This is the problem. With declining home values and homeowners mortgaged to the capacity, they will not be able to qualify for enough loan to actually cover the mortgage. Thus, this plan will not help those who need it.

Then there is my second favorite part of the article.

“One major task of the board will be to figure out how to compensate those who hold secondary claims on a home, who would walk away with no more than 1 percent of the home’s value.”

You think that might be a problem? It is a huge understatement. There are thousands of investors who have invested in these horrible loans. Now they have to take a hit as Congress attempts to bail out a problem they could have prevented in the first place if they were actually doing their jobs as the governing body that is elected to protect Americans from these types of practices.

Just think of the political sound bites and photo opportunity for politicians when Congress finally comes up with their “homeowner rescue” plan.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.

Tags: bail-out, Bob Brooks, Congress, Debt, Deceptive Money, equity, FHA, Foreclosure, government-insured loan, Homeowners, income taxes, loan, Mortgages, payment, politicians, poor credit, Prudent Money, Representative Barney Frank, Washington

As I have written plenty of times in this blog, the politicians, still self-serving, are not actually going to do much for the homeowner in this foreclosure crisis as promised.

First of all, they can’t do anything. They cannot essentially bail-out America. However, they can look like they are doing something and at the same time help big business (read: campaign supporters). Politicians never cease to amaze me.

Let’s look at this latest bill entitled the Foreclosure Prevention Act (that you and I will help pay for).

Homebuilders, Ford and General Motors, airlines and manufacturers, and alternative energy producers will get billions of dollars in tax breaks if this bill becomes law.

They are basically asking tax payers to pay for the bad decisions made by corporate America all in the name of foreclosure relief. As a small business owner, I wish that I had the luxury of dialing up my friends in Washington every time I made a decision that caused me to lose money. Let these industries suffer the consequences of bad decisions like the rest of us are forced to do.

Here is my favorite part of it – the tax breaks are expected to cost 25 billion dollars through 2010. Don’t you worry one bit – economic growth (which any economic growth that we do get in the next few years will for the most part be manufactured by the Government) will cut that bill down to 6 billion. I guess that is intended to make taxpayers feel better. This is from the same set of politicians who spend 42 million to let you know that your tax rebate is coming so you can go out and buy that plasma TV in order to help produce economic growth.

Ok, so they have to be doing something for homeowners. Right? Don’t you worry – they are doing something about the foreclosure problem. They are giving $7,000 as a tax credit to anyone who buys a foreclosed home. They are also allocating $4 billion to communities to buy and fix up foreclosed homes.

I think that the foreclosure problem, past and present, is a little bigger than $4 billion. It is also great that they are giving the people who do have good credit some money in tax breaks to buy foreclosed homes. It seems to me that all this is doing is helping the banks who hold all of these foreclosed homes get this mess off of their books. They originated the bad loans and they should live with it.

What about Joe and Sue Smith who are about to lose their home? Oh I forgot – your check is in the mail so that you can buy that big screen plasma TV….oops – I forgot, you are about to lose your home.

Way to go Washington – I hope that the elections turn out OK for you. By the way, you might change the title from the Foreclosure Prevention Act to the Further Bank Bailout Bill and a little help for our friend in the name of Foreclosures Act.

Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.

Tags: Bob Brooks, Deceptive Money, economic growth, Foreclosure, Foreclosure Crisis, foreclosure prevention act, politicians, Prudent Money, tax breaks

Thankfully none of this is going on in the DFW area where realtors have class. However, in other parts of the country, there are real estate firms that love the fact that people are losing their homes.

Foreclosed homes are “the only game in town,” says Larry Salas of All-Star Realty Sales in Miami (from Yahoo article). With all due respect Mr. Salas, this isn’t a game. Good people have lost their homes. The Yahoo article goes on to say that Mr. Salas has never seen such a weak market in more than 30 years as a real-estate agent, and that suits his firm perfectly.

This is great! Maybe more and more people will lose their homes, Mr. Salas. It is such a great game to play (not in the article).

I have no problem with the real estate community taking advantage of this opportunity. Although the downside is that it does help the lenders who helped create the problem (I personally think that they should take the majority of the brunt of this problem – of course, along with the politicians that allowed it to happen), we do need help in getting this problem of inventory cleared up.

I have a problem with realtors who show no class in the face of those who have lost their homes.

Take Joseph Luliucci as a good example. He is a Las Vegas realtor who takes potential prospective buyers on his “Foreclosure Bus Tour” complete with signage on the bus. He drives these buyers through the neighborhoods of homes that went into foreclosure.

The potential buyers show up and are given a “repo” express name tag.

Well Mr. Luliucci that is pretty clever. You are profiting from the despair of America. I appreciate that you are providing a service and have no problem with the process or that you are getting paid to do so. I just have a problem with how you are going about it.

That Foreclosure Bus Tour idea is great idea, Mr. Luliucci. As you put that marketing message together, just think of the humiliation of the people who went through the process. Just think of the people who were legitimately lied to in the mortgage process and lost their homes. You are driving people through the real estate graveyards of America. I love to look at homes. At the same time, I am saddened when I see a home that the bank now owns.

Just think, with the large percentages of people who have lost their homes in America, you offer the opportunity for them to re-live their experience every time they see your bus.

Maybe that is one of the problems in America. We have lost our sense of integrity. Integrity should have started in Washington.

Look at former Housing Secretary Alphonso Jackson. He should be the poster boy for this problem. He was one that encouraged the type of activity that has driven and is going to drive many into foreclosure. I bring this up only because it is a preview to my next blog. It just baffles me that no one in a leadership position could see this coming. If it is my job to monitor and regulate the housing industry, I would know the situation inside and out. If anyone did, they would see this train wreck coming.

Apparently, Mr. Jackson did not have a clue. He is one of many nightmares that President Bush selected to run lead positions in this country.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.

Tags: All-Star Realty Sales, Bob Brooks, Deceptive Money, forecloseure, Prudent Money, real estate firms, realtors

I get these at least every day. They actually provide some humor in the middle of the day. It is just amazing what a politician will say. Let’s take a look:

FROM THE PRESS RELEASE:

For a year now, I have been speaking out on the need to address our nation’s housing crisis. (What took you so long? This problem has been going on a lot longer. Oh and what were you doing to help prevent this problem in the first place?)

In March 2007, I first called for a “foreclosure timeout” that would bring together servicers, lenders and government actors to help keep families in their homes. In August 2007, I called for increased regulations to protect borrowers and rein in rampant mortgage industry abuses. (Nice thought – a little late. Americans needed protection from the mortgage industry about 6 years ago – I do hope that you and your colleagues enjoyed the nice artificial growth created by the real estate boom and easy credit.)

In December 2007, I proposed a framework to keep families in their homes with a moratorium on foreclosures for 90 days and a voluntary freeze of at least 5 years on adjustable rate subprime mortgage rates. (With all due respect Senator, it just doesn’t work like that. If it were that easy, President Bush would have done that a long time ago and we wouldn’t have that problem. Being an attorney, you should know the huge ramifications that would be had if interest rates were frozen for 5 years – I will give you Kudos for the great political sound bite.)

And in early January of this year, I called for $30 billion in immediate assistance to help states and cities mitigate the foreclosure crisis. (Senator Clinton, if you had $10,000 in debt, would a gift of $1 from the federal government really help? Although $30 billion is a big number, it wouldn’t put a dent in the problem.)

While I was heartened today to see the Administration acknowledge the need for greater federal oversight of the mortgage industry, this news comes seven months and 1.6 million foreclosure filings after I first called for similar steps. (see above comments – what took you so long?)

And while the Bush Administration has belatedly acknowledged that both a foreclosure moratorium and an extended rate freeze are important components of an eventual solution, their approach to-date has been far too narrow to address the scope of the crisis. (That is because President Bush has to play politics as well. He knows that it is important to say they are important components. He also knows that he can’t use them.)

That’s why today, in addition to my proposals for a voluntary moratorium and rate freeze, I am supporting a plan to help millions of families restructure their mortgages on affordable, sustainable terms. I am co-sponsoring legislation with Senator Dodd to expand the Federal Housing Administration’s (FHA) capacity to guarantee responsible, restructured mortgages. This legislation will give lenders new incentives to work with homeowners who have seen the value of their homes fall below the principal on their loans, and put them into more affordable, secure long-term mortgages.

This approach is not a bailout. (Of course not, nor is that program that freezes interest rates – did I just type that out loud?) It is a sensible way for all actors (hey another word for politicians) – lenders, investors, servicers and borrowers – to share responsibility, keep families in their homes and stabilize our communities and our economy.

I first championed FHA reform over a year ago, and offered legislation to help modernize the FHA infrastructure to make the investments in personnel and information technology to help meet market demand and offer safe and secure alternatives to subprime mortgages. (Alternatives to sub-prime mortgages? I wonder if she is referring to 30 year fixed rate loans?) Today, I am expanding that approach so that the FHA can help stabilize the current housing crisis. (I didn’t catch the solution. What can they do besides restructure loans to 30 year fixed loans where people still cannot make the payments?)

Finally, I am calling on Congress to immediately establish a $30 billion Emergency Housing Fund for states and localities struggling with mounting foreclosures. While the recently passed stimulus bill provides much-needed support for struggling workers and seniors (Yep, that $ 600 check is going to go a long way. Maybe a family of four can put enough gas in their car to take a trip and stay at a Motel 6.), it fails to address the housing crisis (You think?), which is at the heart of our economy’s problems. This Emergency Fund would give governors, mayors, and community organizations the resources they need to stem the downward economic spiral that accompanies concentrated foreclosures. (What a relief – I didn’t realize throwing 30 billion dollars is all that you needed to fix the problem.) These resources could be used to buy, rehabilitate and put foreclosed properties back into constructive use (Wow – too bad no one can afford to buy these refurbished homes due to lack of money and the inability to get credit), expand foreclosure prevention and counseling programs (Read: Consumer Credit Counseling-throwing consumers to the wolves), and support community-level efforts to combat blight.

Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.

Tags: adjustable rate subprime mortgage rates, Bob Brooks, Congress, Federal Housing Administration, Foreclosure, Foreclosure Crisis, Hilary Clinton, Housing Crisis, interest rates, mortgage, President Bush, Prudent Money

Treasury Secretary Hank Paulson announced yesterday that 6 of the major banks have come to an agreement to freeze the foreclosure process for 30 days. This is for borrowers who are more than 90 days late. The program is called Project Lifeline.

Now how is that for a plan of action? Are things that bad that the Government has to recommend halting the foreclosure process for a measly 30 days just to figure out what to do next? For most homeowners that are in trouble, an additional 30 days does nothing more than postpone the inevitable.

Well, the foreclosure problem is that bad and looks to get much worse. The Government has a real problem on their hands that could have been prevented if they would have done their job.

Let’s look at this for what it is at face value. We could face an alarming number of foreclosures in 2008 and 2009. Of the homeowners that are in trouble or will be in trouble, a percentage were victims of predatory lending. I would suggest that the vast majority understood they were taking out a loan based on a low payment and buying more home than they could afford.

The system is way too complicated for a government intervention and bail-out. The consequences would be enormous. Someone should tell the Democrats about the consequences. Senator Clinton, with all of her “I told you so”s, chimed in again today saying that she is the only one that has been warning about this and has been for a year. Of course, her solution is to freeze interest rates for years and save the day. Oh Hillary, if it were that easy. Incidentally, this has been a news story for well over a year now. Just like Al Gore didn’t invent the internet, she didn’t warn the world of the impending foreclosure problem.

Then there is my favorite. Now Senate Banking Committee Chairman Christopher Dodd is a real piece of work. He thinks that the Government should buy these loans and re-work them. Seems to me that if his committee was overseeing the banking industry effectively, these irresponsible loans and loose lending standards would have never happened. Just like every other good politician, his solution is to just let the government flip the bill for the problem.

How about pointing to the banking community who created this problem? How about forcing them to rewrite these loans at today’s rates on 30-year fixed notes, regardless of credit? If the homeowner cannot still afford the payment, then nature must take its course. Is Congress protecting the banks or doing its best to protect the consumer? It really is tough to tell.

A program should also be set up to help those who can prove that they were a victim of predatory lending. That group would include everyone who was allowed to buy a home without proof of income. That is a clear example of predatory lending. This problem and solution should be on the shoulders of the banking community.

Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.

Tags: bail-out, banks, Bob Brooks, Deceptive Money, Foreclosure, Governtment, Homeowners, mortgage, Project Lifeline, Prudent Money, Treasury Secretary Hank Paulson