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Senate GOP Calls Fed Proposal to Reduce Mortgage Payments ‘Completely Egregious’

Pat Garofalo
Think Progress / News Report
Published: Thursday 12 January 2012
“Reducing principal is one of the most effective ways to keep troubled borrowers — many of whom are underwater or behind on their mortgage payments through no fault of their own — out of foreclosure, and it would also boost the economy.”
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The Federal Reserve last week released a set of proposals for aiding the battered American housing market, including a series of ways to help homeowners who are buried under the weight of unsustainable mortgage payments or who now find themselves significantly underwater on their home (meaning they owe more on their mortgage than their house is worth). New York Federal Reserve President William Dudley added to the list a proposal for reducing mortgage principal (the outstanding amount on the loan) for underwater homeowners.

The Senate GOP, which had obstructed all manner of help for homeowners, reacted with outrage, saying that helping homeowners in such a way would be, in the words of Sen. Bob Corker (R-TN), “completely egregious“:

Republican Senators Orrin Hatch of Utah and Bob Corker of Tennessee criticized the Federal Reserve for overstepping its role by making policy recommendations on how the U.S. government should try new ways to spur the housing market.

Hatch, the top-ranking Republican on the Senate Finance Committee, said the housing study sent by Chairman Ben S. Bernanke to Congress last week, along with recent Fed speeches, “intrudes too far into fiscal policy advice and advocacy.” Corker said New York Fed President William C. Dudley’s suggestion last week that Fannie Mae and Freddie Mac reduce the principal of the loans they guarantee was “absolutely egregious.”

Reducing principal is one of the most effective ways to keep troubled borrowers — many of whom are underwater or behind on their mortgage payments through no fault of their own — out of foreclosure, and it would also boost the economy. A report from the The New Bottom Line — a coalition of community, faith-based and labor groups — found that “if banks wrote down all underwater mortgages to market value and refinanced the homeowners into 30-year, fixed-rate loans at current market interest rates, that would pump $71 billion into the national economy.”

The Senate GOP, instead, derides the idea, after filibustering an Obama administration nominee because he may have been sympathetic towards principal reductions. But, perhaps that’s not surprising from a party that thinks foreclosure prevention efforts simply “need to stop.”

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ABOUT Pat Garofalo

Pat Garofalo is Economic Policy Editor for at the Center for American Progress Action Fund. Pat’s work has also appeared in The Nation, U.S. News & World Report, The Guardian, the Washington Examiner, and In These Times. He has been a guest on MSNBC and Al-Jazeera television, as well as many radio shows. Pat graduated from Brandeis University, where he was the editor-in-chief of The Brandeis Hoot, Brandeis’ community newspaper, and worked for the International Center for Ethics, Justice, and Public Life.



I am so sick of seeing this

I am so sick of seeing this "through no fault of their own" BS.
It was NOT the Homeowners who caused this Great Deepression !! (Deepression - a Great one, which is Deep)

(Yes, folks, we now have over 25% Un-Employment, perhaps as high as 35%. We started out at 10-15%, when all of those who had been out of work from all of the prior Bush Recessions are counted. Plus, the Federales are only counting W2 employees who "are still looking for work". There are Millions of 1099, Sch C, Sub S Corps, Sch E, LLC and day laborers who are also out of work, but NOT counted.

The only differences between this Deepression and those of '93 & '29 are FDIC, FUI (Un-Employment Ins), SS, MediCare/Aid, and Food Stamps. Otherwise, we would have endless lines at the Soup Kitchens and Bread Lines. Drive-by any homeless shelter or community kitchen or food bank - the lines are long.)

That said, very few homeowners brought this on themselves when all relevant Facts are considered, not the Spin or Big Lie canards, which have been thrown out by the GO/tP, False Spews, Financial Services Industry and a host of knee-jerk yammering yahoos who pass for "expert" talking heads.

Even the "house flippers" were solid capitalist entrepreneurs - i.e., people who were usually already out of a job because of one Bush recession or other and trying to make their own way. They bought low, put in a lot of Time & Money and sold higher. In the process, they prevented blight, improved neighborhoods and increased Property Tax Revenue to Counties and/or States.

Just old-fashioned capitalists who took big hits when Wall St Crashed the Economy. Yet, they, too, have been demonized.

It was more the neo-CONs' and Bush Admin's fault for believing in the Tooth Fairy and failing to Regulate and investigate, than any Homeowner's fault.

As usual, the GO/tP do NOT

As usual, the GO/tP do NOT WANT to "get it". They know. Their relatives are on the Rocks, too. But, they only care verbally. Beating an already Sitting Conservative in the WH with a NeanderCon, or someone from another Planet, is too important to them to help Clean-up Their Mess and Preserve the Nation.

There is a very simple solution to this Mortgage Mess, which was forwarded 2 years ago, but discounted by the Vultures of NeanderConsLand - through the mouth of False Spews. (Do you think Fox's "anchors" really believe what they say? Or are they just paid actors?)

The amount of Money the Fed has "loaned" out to Bail-Out the Big Banks and Brokerages is beyond Staggering! If you still think the TARP Bail-out was ~$800B, you really need to do some research. After TARP Welfare was handed out, the amount many of US already knew about was already over $3T!!

Now, after serial Bail-outs of the Big Banks by the Fed and the release of some Fed docs, we know even better. Just among the Top 16 Welfare Banks, we have these unbelievable Welfare Payments:
#1 Citigroup - $2,500,000,000.
#2 Morgan Stanley - $2,040,000,000
#5 Barclay's (UK) - $868,000,000
#7 Goldman Schs - $816,000,000
#8 RBS (UK) - $541,000,000
#10-15 - Deutsche, UBS, Credit Suisse, Lehman, Scotland, BNP (Fr)
to piker
#16 Wells Fargo - $159,000,000

I won't trouble you with the Math, the Total reported, currently, is over $22T!!! AND, the serial Bail-outs continue..

And, still, Citi and BofA are "zombie" Banks!

Think how much cheaper it would be for the Fed to buy up EVERY Homeowner's Mortgage, write-down the current Principle by the local Devaluation % and adjust the Homeowner Payments accordingly. Then attach a Lien against the Property for Difference, which would become Due & Payable as the house's valuation rose to that level upon transfer of Ownership or in periodic intervals. The Formula would be more complex, but you get the idea. Since Banks were largely responsible for the House Valuation Run-up, a "haircut" should probably Reduce the Total Principal on a Region by Region basis.

Little Money is Lost - only Deferred, but it will keep Millions in their Homes until Congress fulfills Speaker Boehner's Promise to US over a year ago to "focus like a laser beam on creating Jobs ... Good Jobs".

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Well, all I can say is the

Well, all I can say is the Senate GOP are obviously being good stewards of our tax money. I mean, if they help homeowners and regular Americans, how can they do that and funnel huge amounts to Wall Street and big banks? My gosh, those poor people NEED those multi million dollar bonuses and excessive salaries to keep up those gargantuan homes, high dollar cars & their kids in the best schools! How unreasonable can you be yo expect out government to use the tax dollars all those fore loses taxpayers paid to help THEM? That's class warfare!!!

this is a tough one because

this is a tough one because the question goes unanswered in regard to the majority of people who didn't over extend: as in, why should I bail them out?

Those folks end up w/ a new house & the responsible end up in the old, devalued property?

granted many foreclosures are on old property but you get the gist

Lowering the mortgage rates

Lowering the mortgage rates is a step forward for the people and also the economy. Even fi reverse mortgage companies cash in a little lower but people have more money to spend and boost the economy.

Oops ...

Oops ...

@M Munn, you still don't get

@M Munn, you still don't get it. This is NOT "a tough one". You are swallowing the Big Lie.

The Homeowners did not "over extend" vis-a-vis their situation, did not "end up w/ a new house" AND they were trying to be "responsible". It was our Government, the Big Banks & Brokerages and Rating Agencies and Mortgage Banks and Big Builders who created this situation.
Those you are complaining about were a tiny minority or a few crooks, who were foreclosed on in 2009 and are on the streets or living w/ Mom & Dad.

Now, it's all those who lost their jobs because of the devastating Great Deepression the 8 Big Banks, Brokerages and Rating Agencies, Bush Admin and Fed caused!!

And, no Freddie and Fannie were NOT the cause, but also Victims. However, their CEOs have some things to answer for, but were NOT the cause.

Rent and watch "Inside Job", "Too Big To Fail" and, if you're feeling lucky, "Capitalism: A Love Story" (and watch all the way through the 'Credits').

Then, reconsider your Comment.

I like the principal of the

I like the principal of the idea and it may work, but what if the mortgage values keep on dropping?

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This should have been done

This should have been done right from the start instead of the bank bailout. The banks and our 0wn government did this to the Country. Instead, the money for the bailout should have been used to reduce property values back down to reasonable levels and all those involved in this artificial property price inflation should have been prosecuted for fraud, theft and treason and placed in prisons for a very lo9ng period of time. Unfortunately that couldn't happen because our very own government was implicit in the whole thing. Had that happened our Presidential candidates today would be a lot different. You can't run for President from prison.

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