December 06, 2007
Bush Lays Help For Homeowners At Senate's Feet
UPDATED.
President Bush told worried homeowners today that help would be on the way -- once the Senate stopped sleeping on the housing foreclosure threat.
"The federal government is taking several regulatory actions to make the mortgage industry more transparent, reliable and fair," Bush said, as he announced a plan to stop the housing market implosion struck by his administration and the mortgage lending and services industries. "The U.S. Congress has the potential to help even more. It's been three months since I made proposals... and Congress hasn't sent me a single bill to help homeowners."
"If members are serious about helping" struggling homeowners, Bush continued, they will pass legislation as soon as possible.
The House has passed two housing fixes, both of which have stalled in the Senate. Democratic Rep. Barney Frank, chairman of the House Financial Services Committee, seemed to rail against the leadership in his own party when he recently complained that "the increasing inability of the United States Senate to function is becoming a threat to governance."
In a second press conference shortly after the president spoke, HUD Secretary Alphonso Jackson echoed calls for Senate action.
"We've done our part. We need a bill now, as do hundreds of thousands of Americans," Jackson said. "Combining our administration's action and passage of this bill could help 800,000 families in fiscal year 2008."
In the deal announced today, details of which can be found here and here, mortgage lenders and investors agreed to a five-year interest-rate freeze for some subprime borrowers facing readjusted rates they can't afford, and fast-track refinancing for others through HUD's Federal Housing Administration. HUD and Treasury have been negotiating the terms of the plan with the industry and investors since August, when the government acknowledged that the housing implosion posed a great threat to the overall economy.
Bush portrayed the lending crisis as somewhat isolated and reversible. "The economy is strong, and it is flexible, and it is dynamic enough to weather this storm," Bush said. He acknowledged, however, that the prospect of falling behind payments and losing their homes posed "a terrible burden for hardworking families and a source of concern for communities and neighborhoods across the country."
Today's announcement comes as the Mortgage Bankers Association's latest delinquency survey finds 3Q 2007 had the highest foreclosure rate recorded since the MBA began collecting data. The downward tumble in the housing market has already negatively impacted the stock market, consumer confidence and Americans' overall attitudes about their economic futures.
The credit crisis is steering the nation toward recession, some top economists now believe, and the trickiest thing about countering the downward slide is all the moving parts. As part of the negotiation announced today, the government is already sifting out homeowners it deems vulnerable and engaging in a publicity campaign to let them know about the options available to them. Research shows borrowers in trouble either don't know or are too afraid to reach out to lenders or counselors for assistance, a common road to default.
In reaching today's agreement, the federal government had to entice the cooperation of lenders that may have been engaging in less-than-transparent lending practices. The line between lender culpability and borrower responsibility can be a fuzzy one, and while Bush acknowledged that some homeowners may have taken on loans "recklessly," he also called for "stronger lending standards that will help protect borrowers." The mortgages rescue, he said, had been constructed to minimize the threat of lawsuits against the industry, which in turn would be an incentive for the industry's voluntary cooperation.
Part of the reason legislation has stalled in the Senate is Democrats are seeking to clamp down harder on deceptive lending practices. Industry lobbyists, not surprisingly, oppose those efforts and are hoping the White House plan forces Democrats to abandon them. In addition to seeking voluntary regulatory reforms, Bush said, "The Department of Justice continues to pursue wrongdoing in the banking and housing industries."
He and Treasury Secretary Henry Paulson stressed that the plan announced today was no bailout of the industry or homeowners. "We should not bail out lenders, real estate speculators or those who made the reckless decision to buy a home they knew they could not afford," the president said.
Paulson said he was confident that a turnaround "involving no government money" could be engineered. "We are here because we all know that it is in everyone's interest... to develop a market-based approach to avoid foreclosures that are preventable," he said. Acknowledging some economists doubt the measures announced today are dramatic enough to slow down the market implosion, Paulson added, "We've worked very hard since August, and we will continue working.... Our approach will adapt and evolve."
Complicating congressional support for the administration's rescue plan are questions about securities giant Goldman Sach's role in the crisis under former CEO Paulson's leadership. Writing in Sunday's New York Times, conservative economist Ben Stein wondered aloud whether Paulson had any business running the Treasury Department. A couple of days later, Senate Banking Committee Chairman Christopher Dodd, who is running for the Democratic presidential nomination, called on Paulson to address Stein's charges.
WSJ's MarketBeat asks several important questions (subscription) about the rescue package while on MarketBlog, an industry insider raises several disturbing ones. Money reports on the challenges facing the borrower hot line established by Hope Now, an industry alliance focused on helping struggling borrowers.
Posted at 3:20 PM
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Bush Administration, Congress, Economy, House, President Bush, Senate
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