President’s plan nearly useless against foreclosure

Posted on January 7th, 2008 by saman

President George W. Bush latest reforms for the mortgage industry are providing only scarce help to those forced to borrow at sub prime rates. Alarming proportion of such population is facing a looming threat of foreclosure due to the adjustment of mortgage sector. Especially hard hit is the developing metro area of Detroit.

The new legislation is apparently designed to give some protection to the president himself from the political dissidents, who blame him for acting indecisively. It is widely being felt that the package will only provide the president some refuge to counteract the criticism encircling his strategies. At the same time it seems engineered to belittle the events in Congress in importance which are striving to gain some control over the mortgage industry, enhance the protection of tenants against foreclosures, and modifying to some extent, the sub prime mortgage itself. In planning the crux of these reforms The Administrative structure remained unconcerned to the various features of the mortgage sector, such as rampant fraud and sale pitches, and the seductive packages it uses to increase its market volume, causing widespread chaos in the low earning urban communities. Also circumscribed in the legislation is the factor of widespread abandonment, and the resulting collapse of home ownership market in what remains of city’s better off neighborhoods.

The compact gives the role of regulation and guardianship of the public good to none other than the industry itself! Even if hidden by the legal maze, the ways that the bill favors the industry over the public is lucid. Here are some of the features that provide a vivid picture about how this compact can be put to greater advantage to the industrial sector rather than the more deserving citizens.

1. It poses a direct threat to the lenders who fear that they can be sued by their investors for modifying the terms of loans. They feel it as illicit as there is no provision in the law for it.

2. It does not include:

(i) Loan payments before 2005,

(ii) Borrowers with inconsistent current payments

3. Even with these protections to serve the industry, the exercise is entirely voluntary and is left to the lenders to implement it.

Many of the economic experts believe that under the prevailing conditions many of
Detroit will be on streets totally stranded within a time span of 30 months. Some also believe that this can contribute immensely in raising a new wave of rebellions promoting various social evils.

These multitudes of perspectives have not been analyzed by the president who is relying upon a feeble marketplace. In cities like
Detroit, careful programming is required for proper and constant maintenance. All these reforms require surplus capital. The government of Michigan must therefore acquire federal money not only for Detroit, but also for other cities combating similar crisis. This need is as urgent and significant as it was, when bounties totaling billions of dollars were donated for New York City after the 9/11 catastrophe, and for the Gulf Coast after Katrina.