Archive for January 24th, 2012

The Presidential Candidates and their Views on Foreclosure

Politics is always a sensitive topic, one where my clients undoubtedly have a wide disparity of views and opinions, so perhaps I’m nuts to broach the topic.  That said, the four candidates to run against Barack Obama for President were in Tampa last night, discussing a variety of issues important to Floridians, including foreclosure.  As such, I’d be remiss not to provide my perspective on each candidate vis a vis foreclosure, with an eye towards each candidate’s willingness to do something to help homeowners.  In other words, are any of these Presidential candidates, if elected, going to do anything to help homeowners facing foreclosure? 

Brian Williams started last night’s debate with Newt Gingrich, so I’ll start there as well. 

As I see it, Newt’s pro-bank stance is pretty apparent.  Depending on whose version of the facts you believe, it seems Newt was paid somewhere between $300,000 and $1.8 million to provide “consulting” services to Freddie Mac for upwards of a decade prior to the real estate collapse.  Freddie Mac, of course, is a government-sponsored enterprise which buys mortgages on the secondary market, pools them, and sells them as mortgage-backed securities to investors on the open market.  These are, mind you, the very securities which helped create the real estate crash, and Freddie Mac has been notorious in recent years for pushing foreclosures and not advocating alternatives like loan modifications. 

Gingrich’s history is so anti-consumer that even Mitt Romney made Newt’s ties to Freddie Mac a centerpiece of his critiques  in last night’s debate.  Anticipating the criticism, Newt released one of his contracts with Freddie Mac, but read it and you’ll probably agree with me it prompts more questions than answers.  For instance, what, exactly, was Newt supposed to do in exchange for these “consulting” services, why doesn’t the contract so specify (who enters a contract for these amounts without specifying what services are being performed), and what was Newt doing in all the other years of consulting? 

My point isn’t to bash Gingrich.  My point, simply, is that no matter how you spin his ties to Freddie, it’s clear that those ties (both personal and financial) show there’s no way he’s going to do much to help Florida homeowners. 

Verdict on Newt for homeowners:  No help coming for homeowners; more of the same. 

Mitt Romney may have scored points by criticizing Newt’s ties to Freddie Mac, but Mitt is hardly the poster-child for middle-class America.  After all, Mitt famously challenged Rick Perry to a $10,000 bet during a live debate, showing just how out of touch he is with mainstream America.  I guess that’s what happens when you earn $20 million per year in interest

To be fair, Romney shouldn’t be discounted or disqualified just because he’s rich.  America was founded on capitalism, and there’s nothing wrong with someone taking advantage of a capitalist society.  The question, rather, is whether Romney would do anything to help homeowners.  On that score, it seems clear to me the answer is “no.” 

Yes, I realize Romney met with Florida homeowners on Monday and lent a sympathetic ear.  There’s a big difference, though, between showing compassion and taking action as President to fix the foreclosure crisis.  As such, I think Romney’s most telling statements in this regard are those he recently said in Nevada, where he opined:

“Don’t try to stop the foreclosure process. Let it run its course and hit the bottom.  Allow investors to buy homes, put renters in them, fix the homes up and let it turn around and come back up.  The Obama administration has slow walked the foreclosure process … that has long existed and as a result we still have a foreclosure overhang.”

That approach sounds, to me, very much like the businessman we all know Romney to be.  In Romney’s eyes, foreclosures aren’t people losing their homes; foreclosures a problem we should get through as quickly as possible and a business model where investors can make money.  In other words, Romney relates to corporate America, not middle-class America, and he’s not about to implement any new policies to help stop foreclosures. 

Verdict on Romney:  No help coming for homeowners; more of the same. 

For many Floridians, Ron Paul is a fresh voice in the Presidential debate.  He famously voted against all government bailouts, predicting the housing crash years beforehand.  In fact, his Presidential campaign centers largely on the drastic reduction of government intervention, in the economic sector and otherwise.  According to Paul, if the government gets out of the way, and stops spending money needlessly for programs that haven’t worked, everyone will be better off.

Frankly, I’m convinced America would be better off if Paul’s ideas had been implemented years ago.  However, we can’t go back in time, so that’s not the question.  The issue is whether Paul’s approach, i.e. the government should “get out of the way,” would help homeowners today.  On that score, I’m not so sure. 

I see two problems here.  First, imagine two parents who buy lavish, extravagant Christmas gifts for two of their children, then tell the third child “sorry, there’s no money left for any gifts for you.”  We’d all agree that’s inherently unfair, right?  Yet that’s the approach Paul would adopt.  “The government gave the bailouts to the banks, but we’re not going to give any more bailouts – no bailouts for homeowners.”  Even if that’s approach is “best,” it certainly leaves a lot of people cold and bitter, just like the third child who got no Christmas gifts.  Paul would probably say that two wrongs don’t make a right.  Maybe so, but there’s something unsatisfying about letting the banks get the bailout money and then doing nothing for homeowners. 

Also, Paul’s approach, just like that of the other candidates, is not going to stop foreclosures.  Sure, we might not be in this position in the first place had we listened to Paul.  But we are here, and we can’t go back, so letting the free market take over isn’t going to help most homeowners. 

Verdict on Ron Paul:  He was right, but he’s not going to help homeowners

Rick Santorum made an interesting suggestion at last night’s debate – give underwater homeowners some type of tax relief.  Unfortunately, Santorum gave no specifics for such a plan, nor did he explain how the government would pay for the tax cuts.  Mind you, it’s easy for politicians to suggest tax breaks at election time; the question is whether such proposals are realistic in light of budgetary constraints. 

Anyway, even if tax benefits were given to underwater homeowners, that isn’t going to stop banks from foreclosing on delinquent homeowners.  Hence, the question becomes what, if anything, Santorum would do to help homeowners.  On that score, Santorum’s stance seems clear.  Like Ron Paul, Santorum thinks the government should get out of the way and let the housing market “find its bottom.”

Verdict on Rick Santorum:  No help coming for homeowners. 

When I watched the debate last night, I was disappointed that Brian Williams didn’t force a more in-depth discussion of the housing crisis.  For instance, I would love to see a moderator ask each candidate “would you advocate principal reductions on mortgages, and if so, what procedures would you implement to do so?”  Unfortunately, as I study all four Republican candidates, it seems that such a dialogue is unnecessary, as none of them are going to do anything to directly help homeowners. 

Now that I’ve essentially rejected all four Republican candidates, you may think I’m about to support Obama.  Hardly.  Obama has had three-plus years to do something to help homeowners and he hasn’t.  Hence, my verdict for homeowners facing foreclosure, at least with respect to the next President, is a sad one.  Quite simply, no matter who is the next President, no help is coming for homeowners. 

All of that said, the situation is not hopeless.  Florida homeowners can fight their foreclosure case, in court, with an experienced foreclosure defense attorney.  That may sound cliche, and it may appear self-serving, but I’m convinced the next President isn’t going to help homeowners.  As such, if you’re looking for help, a lawyer who knows the ins and outs of foreclosure defense is probably the best you’re going to do.  After all, it seems clear there’s no help coming from the next President, whoever he may be.

Mark Stopa

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