Democrats Ask For Fast Response to Mortgage Foreclosure Crisis

Posted on November 7th, 2007 by saman

Politics has definitely entered the mortgage foreclosure crisis as anticipated and members of the Democratic-controlled Congress have been pushing President Bush to speed-up his efforts to halt the rapidly-escalating tide of mortgage foreclosures. Democrats who are on the House Financial Services Committee have stressed to administration officials that time is of the essence since current statistics project that 2-million sub prime mortgages will reset to substantially-higher monthly payments and thus elevate the number of defaults in the next several months.

HSFC chairman Barney Frank and other panel members are asking why an FDIC proposal that mortgage companies consider converting large numbers of adjustable rate mortgages into fixed-rate loans if the borrowers are still current on their payments has not been backed by the current administration. The adminstration’s point person, Treasury Undersecretary Bob Steel replies that the proposal was under review but provided no endorsement.

Current government efforts by Housing and Urban Development and other government, industry and community groups have provided some advice in mass mailings, increased media advertising and additional toll-free ‘hotlines’, but nothing solid to date. Democrats have been saying repeatedly that government efforts to provide some meaningful assistance to the growing legion of distressed homeowners have been dissapointing and unfruitful to needy Americans.

Many government officials and financial experts are expressing concerns that the entire housing meltdown will result in a full-blown recession in 2008-2009. They estimate that more than 2-million additional mortgage defaults will occur primarily among sub prime mortgage holders because loans were easily given to homeowners with weak credit histories and little or no down payments. As these loans escalate to higher adjusted interest rates, as much as $250-400/month could be added to the initial ‘teaser’ payments under the ARM terms.

Democrats are predicting that it will result in a further housing-market meltdown due to $100-billion in losses as property values decline and properties are sold-off through foreclosure auctions. They also expect that states will lose as much as $900 million in property taxes with California, Nevada, Florida, New York, Ohio and Michigan taking the brunt of the losses.

Foreclosure filings nationwide nearly doubled last month compared to 2006 figures. A total of 223,538 foreclosures were reported in September of this year up from 112,210 in the same month last year. These statistics are tracked and reported by RealtyTrac, Inc., based in California.

The current crisis also has a negative effect on consumer moods, attitudes and spending. In most American households, their homes represent the largest asset they have and its loss has a very-bad influence on the owner’s sense of prosperity and well being. In recent times, homeowners have driven our economy by utilizing credit tied to the value of their property to purchase major products such as large flat-screen TVs and automobiles.

The current foreclosure situation has already soread across the economy especially in those states hardest hit. Many community-based and state government groups have been making every possible effort to help their distressed homeowners find solutions to foreclosure. Everyone, however, is awaiting a federal government solution that is bi-partisan and less subject to politics in the pre-election period.