The New York Times has a nice summary of where the candidates stand on short-term, mid-term, and long-term solutions to the housing crisis. (click here to check it out) Here is a little sample of long term proposals:
Clinton
Introduce legislation to provide legal protection to mortgage servicers “who do the right thing by balancing the interests of the homeowners, the investors, and our economy.”
My Commentary: This is code for providing immunity to servicers who broke the law and are currently not dealing in good faith with borrowers. Each of these servicers already have a duty to balance the interests of homeowners, investors, and our economy. It is a truly awful idea.
Obama
Extend mortgage credit to taxpayers who do not itemize, modeled on a deduction “now predominantly used by high-income itemizers.”
Set tougher penalties for fraudulent brokers and lenders. Create a fund — partly paid for by “increased penalties on lenders who act irresponsibly” — to help people avoid foreclosures.
Require better disclosure from lenders. Create a standardized scoring system to quantify the borrower’s obligation.
Work to eliminate law “that prevents bankruptcy courts from modifying an individual’s mortgage payments.”
My Commentary: This is a real proposal. It is concrete and realistic.
McCain
Create “greater transparency in the lending process.”
Says any federal assistance for borrowers “must be temporary” and “should be focused solely on homeowners, not people who bought houses for speculative purposes, to rent or as second homes.”
Adopt policies to ensure that homeowners “provide a responsible down payment of equity at the initial purchase of a home.” Opposes reducing the down payment requirement for Federal Housing Administration mortgages; believes the requirement should be increased “as conditions allow."My Commentary: This is a non-proposal, and it is working on the assumption that the cost of the housing crisis should only be paid by homeowners rather than all of the other entities that share responsibility with the homeowner.
4 comments:
In fairness to Clinton, her proposal regarding mortgage servicers is probably directed at insulating the servicer from liability for deciding to offer a loan modification or refinance opportunity to distressed borrowers.
Right now, when a loan is securitized, servicers can be in a bind because pooling and servicing agreements require the servicer to maximize the investment return to the trust. Permanent modifications and refinances may not always be seen as maximizing trust income. So if a servicer decides to undertake modifications or refinances, it could open itself up to lawsuits from security holders, trustees, or others.
There are other reasons that this proposal isn't a good idea, but those are really concerned with how undermining contractual certainty could affect the larger credit markets. Strictly from a short-term consumer perspective, it's probably a good idea.
My commentary: You spent a lot more time listening to Obama than you did the other candidates.
Create a standardized scoring system to quantify the borrower’s obligation.
I know he's busy campaigning, but it would be great if Obama could introduce this legislation right away. It's the kind of thing it would be easy for other senators to get behind and has the potential not only to pass, but to make a difference in the near future.
Where's Ron Paul?
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