Prevent More Foreclosures

Posted on April 7th, 2008 by saman

Democrats in the senate have said that they attempt to force a vote on laws that would help mortgage holders in trouble stay in their homes.

The Senate will try to win consideration for the Foreclosure Prevention Act. This act aims at helping distressed families avoid foreclosure and help aid communities that have been harmed by the current housing crisis. Last month the bill was blocked by Republicans.

Members of the Senate say that the problem is getting more serious day by day and if the act is delayed, homeowners are being put in jeopardy.

Democrats believe that the White House is being unresponsive to the needs of homeowners. Instead of comprehensive government intervention, officials are more inclined to advocate lenders voluntarily assisting homeowners with foreclosure rescue actions.

Democrats also noted how quickly the government acted to help Bear Stearns. They believe the administration should pay more attention to those losing their homes than to big corporations.

The mortgage crisis has gone beyond what caused it, subprime loans. The crisis will most likely get worse when billions of dollars in mortgages are reset. These rates will most likely adjust to levels that most people cannot afford. When rates are reset it is believed that this will increase the foreclosure rates even more and harm the economy.

Something that will most likely get in the way of the act being approved is the reluctance of Republicans to accept the bankruptcy reform provision of the act. The bankruptcy reform provisions would permit judges to reduce mortgage balances to match the drop in home values. The bankruptcy provision may prevent the act from being passed because it involves the federal government changing business contracts through the court system.

Some officials would like to implement bank regulations to avoid future mortgage problems. Some believe these reforms are necessary but will probably do little to alleviate the current problem. Officials think that the regulatory system is irrelevant when it comes to the current housing problems in this country. Regulatory bodies have had the capacity to regulate lending for quite some time.

These regulatory bodies have failed to be leaders, and the administration has failed to use the tools that they have been available to them. These tools deal with the financial practices that have led to this current crisis. That is considered the real problem, not the regulatory system itself. The regulatory system has just fallen behind the many rapid changes that have been occurring in the financial market.

An economist by the name of Jared Bernstein suggests that any solution to the mortgage crisis should contain three parts. First, help should go to homeowners instead of speculators. Also lenders should be encouraged to decrease mortgage balances so that they are equal to what homes are actually worth.

Solutions should be structured in a conservative way so that good money is not wasted trying to solve the problem quickly.

The problem occurring now is that the housing market has changed and has developed unique characteristics. Price corrections take a long time to occur in the market and the market will not bounce back until this has occurred.