Uniform Loan Modifications For Minnesota Homeowners Facing Foreclosure

A case-by-case approach for helping consumers on the brink of foreclosure was what lenders were arguing for as recently as this week in an article published in the Star Tribune by HJ Cummins, Bringing some owners back from the brink of foreclosure.

The article did an excellent job of outlining in plain-English how loan modifications may be becoming more prevalent, but a case-by-case approach is far too complicated. The article also has a quote from me, so it must be well-balanced.

Now the Bush administration has turned a corner and is pushing for uniform loan modifications. After more than a year of delay and thousands of people losing their houses, I think they actually realized that, if nothing dramatic is done, we are talking about a five year problem not a six-month problem. To find out more about the late-but-good reversal of opinion, check out the Wall Street Journal article by clicking here.

Also, Nouriel Roubini (a guy who is right more than he is wrong, and a lot smarter than I am) also had a very well-reasoned explanation. Here's a little about what he had to say, but if you really like economics you can read the whole post by clicking here:

Thus, while an across the board approach is not totally fair – as some debtors who could pay and don’t deserve debt relief do receive it – this approach is the only feasible way to deal with the need to rapidly restructure millions of separate debt contracts. Thus, while some market fundamentalists were always pushing for a case-by-case approach and wanted to avoid the IMF supporting an across-the-board approach to debt restructuring it became clear to all that, with the exception of very large corporations or financial institutions, the across-the-board approach was the only feasible one to deal with such debt crises.

This simple lesson, that has been known for ages now, has been finally learned - after a long year of subprime meltdown - by the US Treasury and major mortgage lenders as they are now planning an across-the-board approach to the restructuring of the mortgages of some categories of sub-prime borrowers.

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So after wasting almost a year in supporting a case-by-case approach to loan modification and realizing that only a paltry 1% of such mortgages had been modified as lenders and servicers did not have either the skills or the human resources or the physical resources to modify one by one millions of loans after a dragged out negotiating process with the debtor, both the mortgage lenders and the US Treasury have now gotten religion and accepted an approach that they had vehemently opposed before: i.e. move from a case-by-case to an across-the-board approach to loan modification. Even Paulson finally got it that – as reported by the WSJ - it would be impossible to "process the number of workouts and modifications that are going to be necessary doing it just sort of one-off."

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Friday Funnies: The drug you need...

A little tune to lift your heart during this prelude to the dark days of Minnesota winter from our friends at Consumers Union:

The Roller-Coaster Part VII...or is it VIII?

The consensus is that the state budget forecast that is being released today is going to be bad. Here's the description that led MPR's story yesterday:

A slowing housing market, high oil prices and a flat job market could signal slow economic growth next year. Gov. Pawlenty cited many of those trends when reporters asked him for a preview earlier this week.

Setting aside the raising taxes/lowering taxes debate, when is an elected official going to acknowledge that what we tax and how we calculate it (not the total amount or percentage of taxes themselves) has created a roller-coaster ride of massive surpluses and deficits? This roller-coaster frustrates our ability to budget and plan, and creates eternal strife, bickering, and political cannibalism. The tragic irony is that it is nearly always the people who most need government assistance in a time of an economic downturn or recession that have their services cut under the mantra of "living within our means."

We do have to live within our means, I agree, so lets set-up a system that defines what that standard of living is and create a more steady and predictable funding source to maintain that level. We cannot base our budget on taxing goods or services that don't sell when the economy slows or to pretend that inflation does not exist...that just results in what we have been living for the past eight+ years: having a massive shortage of revenue when we need revenue and a massive surplus when we don't.

Does anybody remember about a year ago when certain legislators were mocked for saying that a $2 billion surplus didn't really exist because the calculations were bogus? Well, looks like they were right.

Rating Credit Cards: The big news that most people missed

A few weeks ago, Senator Barack Obama made a creative, ground-breaking consumer proposal that was not particularly well-covered by the media. In the middle of a speech entitled "Reclaiming the American Dream" Senator Obama talked about a number of consumer initiatives, but the one that caught my attention was this:

To make sure that Americans know what they're signing up for, I'll institute a five-star rating system to inform consumers about the level of risk involved in every credit card. And we'll establish a Credit Card Bill of Rights that will ban unilateral changes to a credit card agreement; ban rate changes to debt that's already incurred; and ban interest on late fees. Americans need to pay what they owe, but they should pay what's fair.

Now Senator Obama and Senator Wyden are about to introduce this legislation. A five-star rating, particularly if the stars have to be printed on the face of the credit card, will go a long way in helping consumers understand the quality of their credit card. You'll be able to quickly know whether there have been tricks and traps built into your credit card contract that will cost you money.

It used to be that credit card companies made their money on the small fee or percentage they charged per transaction, now the business model has changed. Huge amounts of money are made through late fees and teaser interest-rates that jump dramatically to over 20% if you miss one payment. Creating a rating system that deciphers the dense and often cryptic language in credit card contracts will allow consumers to actually shop for the right product. Information is the key element in a free-market system.

The Launch of CRW....

Thank you for visiting and reading Consumer Rights Watch. This is the first post for CRW, and I wanted to give you a little idea about why we exist. Certainly there is not an overwhelming, apparent need for more websites, more e-mail newsletters, or more blogs---but I think CRW is a little different.

CRW is an attempt at citizen lobbying and Internet-organizing about issues that impact people's everyday lives...credit cards, housing, car buying, education costs, transportation, privacy, banking, etc. Nothing like this really exists at the local or state level in Minnesota. At the state legislature, Consumers don't have powerful trade organizations or political action committees. Often times there are just one or two people who represent the views of consumers, families, workers, and low-income people. These people take-on legions of well-paid, well-connected industry lobbyists.

My hope is that CRW will be a means for regular people to stay informed about potential legislation or government action, and encourage those people to write, email, and call their representatives to make sure that their needs are not forgotten.

As for me, I am not paid to do this. The views expressed on CRW are simply my views. I've worked on public policy, legal, or consumer issues for over ten years, and I think the Internet provides a method to empower people who haven't had that opportunity in the past. If I can convince one person to call their legislator or testify in favor of a piece of legislation, I will consider CRW a success. Hopefully, we find more than one.

Again, thank you for reading and I hope you sign-up for our legislative action alert.