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UNDERNEWS

Undernews is the online report of the Progressive Review, edited by Sam Smith, who covered Washington during all or part of ten of America's presidencies and who has edited alternative journals since 1964. The Review, which has been on the web since 1995, is now published from Freeport, Maine. We get over 5 million article visits a year. See prorev.com for full contents of our site

January 26, 2010

HOW TO DEAL WITH THE FORECLOSURE DISASTER

Danny Schechter, Information Clearinghouse - For nearly two years, I have been calling to modify loans, not foreclose on homes. The government said they would do it but their programs don't appear to be working because banks and real estate companies make more money foreclosing than making deals that keep homeowners under their roofs

The consequence: 14 million families-and we are talking millions of children too-forced into the streets or worse conditions.

The New York Times blamed the President's Making Home Affordable program for increasing the agony of homeowners.

"Since President Obama announced the program in February, it has lowered mortgage payments on a trial basis for hundreds of thousands of people but has largely failed to provide permanent relief. Critics increasingly argue that the program, Making Home Affordable, has raised false hopes among people who simply cannot afford their homes."

Wrote a critic on the Atlantic: "Obama's Making Home Affordable program is actually increasing the agony of homeowners, who pour money down the rat hole of their mortgage rather than recognizing the loss and starting over. In the meantime, the modification programs disguise the true condition of bank balance sheets (because modified mortgages are not yet non-performing mortgages), and slow down the process of recovery.

The Washington Post found, "The government's foreclosure relief program is sputtering, according to government data showing that the pace of help being offered to struggling homeowners slowed last month and many borrowers are at risk of losing the aid they have already received."

The LA Times went further, "Only 31,382 of more than 700,000 mortgage modifications under the federal program had been made permanent by the end of November. . . The numbers reinforced the bleak picture that Treasury Department officials painted last week when they said the number of permanent reductions was low. They unveiled new measures, including the threat of fines, to push mortgage servicers to improve their performance."

When airport security doesn't work, they junk it. It is time to do the same with programs that are not helping homeowners. These half-measures that are being so half-heartedly implemented are a cruel disgrace.

But if we are to solve this problem, we are going to need to press the Administration and the banks to recognize they must go further. To achieve that, we need to get back in the streets to push for what we really need: debt relief, and a moratorium on foreclsures..

Sounds radical? It isn't There are precedents. The US government and even Republicans have backed debt forgiveness. . . in Africa.

There, our government and others agreed to debt forgiveness programs because it was clear that colonial powers had illegally shackled the newly independent states with an unsustainable debt burden. Those debts were imposed, suffocating unfair and illegal.
Recently, just before the earthquake, Haiti won a billion dollars in debt forgiveness and then promptly began to borrow money again. Haiti's problems may mirror our own in another way with Presidential proclamations of "help on the way" undermined by poor or non-existent delivery.

In our country, millions of people were talked into taking bogus subprime loans that lenders knew were deceptive. According to the FBI there was "an epidemic of mortgage fraud." These loans were then securitized by Wall Street and sold worldwide with misrepresented values. Another fraud.

They were also insured by companies like AIG with shady insurance deals to guard against the defaults they knew would follow. This was not just business as usual but, in part, a criminal enterprise. There are many foreclosure relief scams too. A lawyer in Orange County California was just charged with engineering 400 foreclosure modification frauds. . .

An Online Legal Dictionary reminds us that the government has powers to act that it is not using.

"As a function of its Police Power, a state may suspend contractual rights when public welfare, health, or safety are threatened. During the World War I housing shortage, some New York landlords raised rents to exorbitant levels and evicted tenants who failed to pay…

Some states went further imposing a debt moratorium. In happened in Minnesota during the depression when there was a sharp rise in foreclosures on farm property, "Fifty years later the Minnesota legislature responded again to public pressure to relieve farm debts by passing another Mortgage Moratorium Act"

"In its view, the state had a right under its police power to declare an economic emergency," says the writer Alex Abella, who contributes to the LA Times, "to safeguard the public and promote the general welfare of the people" which necessitated the drafting and implementing of the moratorium.

"Needless to say, financial interests -- banks, loan holders -- sued, losing both at the state and the federal level. When the case finally arrived at the U.S. Supreme Court, Chief Justice Charles Evans, in the case of Blaisdell versus Home Building & Loan Association upheld the constitutionality of the moratorium as a "reasonable means to safeguard the economic structures upon which the good of all depend."


1 Comments:

Blogger Laura Harrison McBride said...

Coupled with the Extreme Court's recent ruling regarding corporations as persons, it would seem the call for mortgage relief has less chance of succeeding than the war in Afghanistan. Since corporations--banks, mortgage companies and the like--are now officially "people" in the United States, it will be all too easy for government (next chapter: are government agencies "people" too? Perhaps Roberts and his Gang of Four can decide) to pervert the words of Charles Evans in order to safeguard the economic structures upon which the good of THOSE "people" depend. RIP, United States.

January 27, 2010 5:42 AM  

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