Archive for May 13th, 2011

Obama – Starting to Get it?

I’ve been vocal for many months about the fact that the foreclosure crisis isn’t going improve in any significant way without huge changes by the government.  As I said, here, principal reductions on all mortgages of owner-occupied properties would discourage strategic defaults and cause more homeowners to make mortgage payments.  In other words, widespread principal reductions are necessary and beneficial for both sides of this ongoing battle. 

Today, President Obama made a few statements that suggest he’s begun to see the light.  Unfortunately, his statements aren’t nearly strong enough.  This is the quote that really bothers me:  “If we were there for you [banks] when you got into trouble, then you’ve got to be there for the American people when they’re having a tough time.” 

Newsflash, Obama – the banks aren’t going to act in the public’s best interest out of the kindness of their hearts, for moral reasons, or anything else.  All they care about is profits.  So if you think principal reductions are the way out of this mess, then it’s up to you to act. 

Here’s the article.

WASHINGTON (CNNMoney) — President Obama said that struggling homeowners need even more help from the banks, in a CBS town hall that aired Thursday.

Calling housing “the biggest headwind on the economy right now,” Obama broached two relatively new ideas for the White House: Longer-term mortgage modifications and principal reductions “in some cases.”

Both ideas would require Congress to pass laws to force the banks to cooperate.

“If we were there for you [banks] when you got into trouble, then you’ve got to be there for the American people when they’re having a tough time,” Obama said during the CBS program which was taped on Wednesday.

In response to a question posed by Nancy Logan of Virginia, an underwater homeowner whose three-year mortgage modification will expire in January 2012, Obama said that reducing some mortgage principals would benefit the banks as well as homeowners.

“In addition to these short-term loan modifications, we want to see if we can get longer-term loan modifications. And in some cases, principal reduction, which will be good for the … person who owns the home, but it’ll also be good for the banks over the long term,” Obama said.

Foreclosures crush home prices

Obama’s mention of principal reduction, in particular, is sure to stir Wall Street banks. When Obama campaigned, he had talked about pushing for policy to give bankruptcy judges the ability to write down principal owed on homes whose owners are bankrupt.

But when he took office, the president stood on the sidelines of legislation that would have allowed principal reductions, and his administration said that current housing policy was good enough.

Since then, the president rarely, if ever, publicly discussed principal reductions.

Big banking groups have traditionally lobbied hard against any new policy that would open the door for more principal write downs.

At least one banking group said they weren’t opposed to a policy that would open the door for mortgage modifications that spanned longer periods, but they can’t support legislation that invites more principal write downs.

“Banks are committed to helping Americans struggling with their mortgage,” said Scott Talbott, senior lobbyist with the Financial Services Roundtable, a bank lobbying group. “Banks have already worked directly with over 4 million Americans to make long-term mortgage modifications.”

During the town hall, Obama also defended his administration’s housing programs, which one independent inspector general had criticized as a failure. House Republicans passed a bill to kill the administration programs that give banks incentives to modify mortgages.

“The problem is .. that the need is so great. So it’s like you have a huge pothole, and you only have so much gravel,” Obama said. “If you’re talking about $5 trillion worth of home value, and a program that only has a few billion dollars, then there are a lot of people who are not going to be helped.”

Mark Stopa

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