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  • Neighborhood Destabilization Act: H.R. 1106

    “Helping Families Save Their Homes Act”?

    • Or Neighborhood Destabilization Act: Allows bankruptcy judges to reduce the principal owed on a mortgage, a practice often referred to as a “cramdown.” Judges would be able to reduce interest rates or lengthen the term of the mortgage.
    • H.R. 1106: It actually achieves opposite results by putting millions of homeowners or potential buyers at greater risk of an unstable credit and housing market and creating high interest rates in the future.
    • Temporary? No. Weak? Yes: The simple rule on Capitol Hill when a bill is controversial is claim it is temporary and expand it later. That is the case here. Additionally, the bill lacks many of the targeted limitations designed to make sure that bankruptcy is a last resort and even weakens language passed earlier by the House Judiciary Committee that was designed to keep those who filed fraudulent mortgage applications from taking advantage of cramdowns.

    Destabilizing Results

    • Higher Mortgage Rates: Cramdowns add additional risk that mortgages will not be repaid as the contract requires. Lenders must charge for that added risk, and experts estimate that the additional costs would raise mortgage rates by as much as two full percentage points or substantially increase required down payments.
    • When in Doubt, Go Bankrupt: As homeowners struggle with homes that have lost value in this economic downturn, the easiest option available will be to declare bankruptcy, whereby they can renegotiate not only their payments but the actual value of their homes.
    • Destabilizes Credit Market: Banks and investors are already facing heavy losses because mortgage-backed securities have lost much of their value due to uncertainties about whether the mortgages will be paid. This measure increases that uncertainty, risking both foreclosure and cramdowns that reduce the earnings of these securities. Investors have no idea what this new provision will do to the value of their securities, dropping prices further.

    No Hope for Homeowners

    • Good Money After Bad, Again: In addition to the cramdown measures, H.R. 1106 expands the Hope for Homeowners program. Last summer, Congress created Hope for Homeowners, an FHA-based program that it originally claimed would help up to 2 million homeowners. According to the FHA, it has actually helped about 500. The legislation makes a number of changes that will raise the cost of it by $2.3 billion but is unlikely to otherwise improve it.
    • Responsible Taxpayers Lose, Again: The expansion in this bill would further erode taxpayer protections by allowing even more extremely troubled loans to be accepted to the Hope for Homeowners program. H.R. 1106 would expand this program to include even more unstable mortgages, all to allow people who are in homes they can’t afford to stay in them.

    Unfair at Any Cost

    • Robbing the Responsible Homeowner: Congress cannot enact a policy that imposes major, unexpected losses on home lenders without raising the cost of and reducing access to home loans, period. This policy penalizes responsible homebuyers and future homebuyers in order to provide immediate bailouts to the irresponsible and keep them in homes they cannot and will not afford. Taxpayers who saved for a responsible down payment, bought a house they could afford, and made their payments will pay for the mistakes of others.
    Posted in Ongoing Priorities [slideshow_deploy]

    24 Responses to Neighborhood Destabilization Act: H.R. 1106

    1. Brentwood, CA says:

      Modification of Chapter 13 Bankruptcy Laws to empower judges to reduce the principal and interest rates of 1st mortgages should be supported for the following reasons:

      1. The primary reason so many existing home owners are underwater in their homes is not due to poor planning on their part, but due to overinflated demand created when mortgage lenders submitted fraudulent loan documents misrepresenting some borrower’s earnings, resulting in many long term home owners “upside down” in there homes (see http://money.cnn.com/2009/02/25/real_estate/boome…. Mortgage lenders knowingly and intentionally inflated borrower’s earnings on loan applications to ensure approval, and receive the fees for the approved loans. Unfortunately, our government at both the Federal and State level turned a blind eye to this activity. With mortgage lenders actively engaging in fraud and government refusing to enforce the law, the result was an extremely high, artificial demand for housing that caused home prices to sky rocket. As with all fraud, these schemes ultimately failed and a financial crash ensued. In this case, causing the worst crash in home prices on record. Thousands of home owners that did not participate in these illegal activities saw their home equity evaporate and worse found themselves “upside down”, owing more than their house was worth, through no fault of their own.

      2. Given that the loss in home values is a direct result of fraudulent activity on the part of many mortgage lenders, the lenders, not only the homeowners, should be liable for the losses as well. Empowering judges to reduce the principal and interest rate on first mortgages forces lenders to shoulder their fair share of the financial hardship that they created when engaging in lending fraud.

      3. Empowering judges to reduce the principal and interest rates on first mortgages make lenders more willing to negotiate new mortgage terms with borrowers. Even with new legislation to incentivize lenders to negotiate new terms with borrowers, lenders are extremely reluctant to reduce principal. Instead they offer a 40 year mortgage or slightly lower rates, leaving the borrower with a home worth substantially less than the mortgage. The borrower should have better options as the lenders created the problem. The alternative of a Chapter 13 bankruptcy with 1st mortgage principal and interest rate reduction will strongly encourage lenders to deal fairly and equitably with borrowers.

      4. The economy will not recover until people start spending money again. People cannot spend money when burdened with excessive amounts of debt brought on by a collapse in the housing market. Until consumers are offered means to reduce their debt, they will not spend, and the economy will not recover. Even with the new stimulus package, many consumers will not be able to reduce their amount debt significantly, creating a continued drag on the economy. Empowering judges to reduce the principal and interest rate on first mortgages will provide many consumers with a very significant, tangible way to reduce their debt, thereby, increasing their purchasing power, resulting in substantive economic stimulus. Furthermore, this stimulus does not cost government or the tax payer anything as the losses are taken by the lenders, who were responsible for the creating the situation.

      Furthermore, the argument that this will cause dramatic increases in mortgage rates for everyone is false! The study by Adam J. Levitin, Associate Professor of Law, GeorgetownUniversity Law Center and Joshua S. Goodman, Ph.D. candidate, Department of Economics, Columbia University show that passing H.R. 3609, The Emergency Home Ownership and Mortgage Equity Protection Act of 2007 and S.2136, The Helping Families Save Their Homes in Bankruptcy Act of 2007 would result in virtually no increase in mortgage interest rates (http://www.reuters.com/article/pressRelease/idUS154303+06-Feb-2008+PRN20080206). Do not be fooled by the Mortgage Bankers Association (MBA), they are trying to protect their profits and shield themselves from any responsibility for the illegal activities.

      Chapter 13 bankruptcy is no “free ride” as it is on the filer’s credit history for 10 years, resulting in significantly higher interest rates for future loans. Therefore, people only in dire situations would consider this alternative. The alternative should be given to them because their financial hardship resulting from loss of home equity is often not their fault. Many responsible home owner’s find themselves in a terrible situation, losing tens or even hundreds of thousands of dollars due to falling home prices through no fault of their own. Government failed to enforce laws prohibiting the lending fraud taking place during the boom, resulting in horrific losses for owner’s after the speculative bubble collapsed. These owners should be given the opportunity to correct their financial situation! Please pass legislation empowering bankruptcy judges to reduce the principal and interest rates on first mortgages in a Chapter 13 bankruptcy proceeding.

      Sincerely,

      Michael

    2. Eric, CA says:

      Sorry, Brentwood, CA, but your argument is uninformed.

      1. You argue that the mortgage crisis is not the fault of the borrowers, but of the "mortgage lenders" who "submitted fraudulent loan documents misrepresenting some borrower’s earnings."

      Who did the mortgage lenders submit those false applications to? Perhaps you meant to rail against mortgage BROKERS, some of whom submitted false applications to mortgage lenders. If that's what you meant, why do you believe it appropriate to have the mortgage lenders — who were cheated — take the hit?

      And surely you aren't arguing that the mortgage brokers did all of this lying without the knowledge of the borrowers themselves. You are aware, aren't you, that the borrowers sign the applications with the false data. No one on either side of the argument is saying the borrowers didn't know about the lies being perpetrated over their signatures.

      2. Having concluded, without a basis, that it's all the big bad lenders' fault, you say the lenders should bear the loss "as well." Ok, first, as shown above, it isn't the lenders who are at fault. It's the borrowers and, in some cases, mortgage brokers. But the lenders are the victims; the ones who were lied to.

      And even if you're right and they're to blame, while you say they should bear the loss "as well," you advocate a solution (bankruptcy cramdown) that imposes the entire loss on them and not on the borrower. If the pending legislation goes through, The bankrupt borrower gets to cram down the mortgage to the current "value" of the property, leaving the lender to take the hit. You apparently believe the borrower who (using the fraud examples you describe) perpetrated the fraud should benefit from that fraud.

      3. You say that "empowering judges to reduce the principal and interest rates on first mortgages make lenders more willing to negotiate new mortgage terms with borrowers." Ok, first, the legislation would mostly hit second mortgages, not firsts. A cramdown hits whichever lender is lowest in the pecking order before it hits those above it.

      Second, sure, giving the debtor the power to force a lender to give up part of what the debtor promised the lender will serve as an incentive. Giving them a gun and the right to use it would do it too. That doesn't make it right. If a debtor promised to pay $x at x%, why should the government be giving the debtor the right to force the lender to take something less? Yeah, I know. Big bad banks. It's always ok to take something from someone you don't think it will hurt. But I'll get to that later.

      4. You say the economy won't start moving again until people start spending money. I'll buy that. But putting banks out of business won't do that.

      It's easy to think "Well, the banks can take the loss" because you think of a bank as a faceless entity. But the banks that are lending money right now are the little ones, not the Citigroups or BofAs. These are the ones who will be hardest hit by the legislation. BofA can take a couple of billion dollars loss — especially when they're being subsidized by TARP funds. But the little banks that made loans that were good at the time they were made are the ones who will struggle to survive losing hundreds of thousands of dollars in crammed down loans. As the go under, who will make those loans we keep hearing the economy needs to get right?

      People will start spending money when the government stops meddling in existing contracts, and stops spending money on social projects, and focuses on creating jobs.

      5. You say that interest rates won't go up if the legislation passes, and you cite one study. Think about it. If you are lending money based on collateral, and if you know that if the value of the collateral goes down you — not the borrower — will bear the loss, isn't that a risk you'd want to consider when pricing the loan? Wouldn't you price that loan higher than you would if you didn't have that risk?

      Further, if a lender who survives sustains losses, who do you think will pay for those losses? It's easy to say the bank will pay. But that means either the shareholders will pay in lost dividends (and those shareholders are just as likely to be retirees on limited incomes as they are to be the Warren Buffets of the world), or it means the bank will raise its rate on future loans to compensate for the loss.

      Of course any law making real estate loans riskier to the lender will result in higher interest rates. And who pays those rates? Your kids and mine when they go to buy houses.

      6. You say that Chapter 13 is no "free ride," and that only people in dire situations would consider that solution. That's just not true. Chapter 13 debtors routinely write off debt while living in expensive houses, driving newer model vehicles, and watching premium cable channels on their big screen tvs. Routinely. I've seen people who could absolutely pay their debt if they were willing to restrict their spending opt instead for the easy out of Chapter 13 bankruptcy. If, as the legislation proposes, a person will be able to write off $50-70-100,000 of mortgage debt by filing Chapter 13, they'll line up to do so. I promise.

      Your argument also fails to address the unfairness of the legislation to those who "played by the rules." True case: Borrower A scrimpted and saved and put 20% down on a $600k house. He qualified for a bigger loan, but wanted to be responsible. Owes $475k a year later, but the house is worth $420. He's able to make his payments because he drives an older car and is careful with his spending. Borrower B bought the biggest house he could qualify for. Bought a bigger place than neighbor Borrower A with minimal down, then borrowed against it and his credit cards to furnish it to the nines. Borrower B owes $825k on his house and $35k on credit cards. His house is worth $500k. He's now way past due on the house and the cards and foreclosure is imminent.

      What would the legislation do? It'd let Borrower B, whose credit is ruined by the foreclosure and the delinquency anyway, to file Chapter 13, wipe out the $35k in credit card debt, and reduce the balance on his fancy big house by $325k down to $500k. What would it do for Borrower A? Nothing, unless he wants to file bankruptcy just to write down his mortgage.

      One final point: When the press writes about this legislation, they speak of "empowering bankruptcy judges to reduce the principal and interest rates." As a practical matter, judges won't have much to do with it. The legislation would allow debtors to do with homes exactly what they do with cars already. The debtor files a plan that states whatever value the debtor wants to assign to the car. Unless the creditor receives the plan, reviews it, determines what it believes the collateral is worth, hires an attorney, and files an opposition to the plan, all within two or three weeks (and, very often, less), the debtor's value is approved by the court by default. There are no kindly white-haired judges burning the midnight oil trying to decide which debtors deserve breaks and which don't. In most cases, the cramdown will be automatic. Even when the creditor objects, the only real question the court will consider is the value of the property, not whether the debtor is deserving of the right to cram the loan down.

      Certainly something has to be done. Perhaps a bill that allows the cramdown of subprime mortgages would be fair — those lenders knew they were taking a higher risk and priced their loans accordingly, so it isn't unfair to let them pay when their gamble failed. Or perhaps a bill that allows cramdown to half way between the current value and the current loan balance, so the lender and the debtor share the loss.

      But the bill as written is intended to play on peoples' sense of victimhood. Someone has to be at fault, and it ain't me. Blame the banks. If it passes, small lenders will fail, those they would lend money to will not get loans, employees will lose jobs, and investors (including retirees invested in funds that hold bank stock) will lose their investments. Meanwhile, those who really caused the problem — borrowers who bought more house than they could afford or who borrowed more against their houses than they could afford to repay — will keep their toys and be saved from the effects of their bad decisions.

    3. Michael, Brentwood says:

      Actually, the disinformation stems from your lack of knowledge of fraud.

      1) Officers and agents of banks are responsible for the documents they submit for approval unless it can be shown that the borrower was committing fraud unknown to the agent. Many borrowing agents have admitted to convincing and even worse, submitting fraudulent income reports without knowledge of the borrower. Why? Commission. Countrywide, the largest owner mortgages at the time admitted to these practices. However, no one was prosecuted.

      Furthermore, I do point out that state and federal agencies are at fault as well for not enforcing the law.

      2) The borrowers do suffer with significantly higher rates on future loans, and more importantly, the loss of equity in their home. The lenders are responsible for the loan principal because they take the risk in lending. It should be noted that cram downs are nothing new in Chapter 13. Vacation homes, boats, etc. are currently eligible. However, not 1st mortgages (hello MBA). This is great for yacht owners, but not the average working person.

      3) You seem confused about the legislation (e.g. HR1106). The judge, not the borrower, resets the interest rate based on the prevailing market. Why? Because there is no other way to re-finance under current conditions. Why should the borrower be forced to accept this? Again, under chapter 13, they already do, except the first mortgage (see comments above).

      Also, "pecking order" does not apply in this case. If the house is worth less than the first mortgage, then the second mortgage will be automatically stripped under either current or new legislation.

      The gun analogy does not warrant serious comment.

      4) The reality is that the banks that committed these fraudulent acts are already going out of business (e.g. Citibank). They have been given 350 billion dollars and done nothing with it, except give out bonuses.

      However, even if they chose to lend, so many people, including many that had nothing to do with getting mortgage in the last five years (see my link above about baby boomers losing equity), would have difficulty getting credit.

      The government (e.g. tax payers) will keep the banks afloat, but hopefully, enforce new guidelines to ensure tax payer's money is lent.

      6) Borrowers cavalierly filing bankruptcy is not supported by the data. A Harvard study published after the 2005 bankruptcy reform showed most people filing bankruptcy, did so due to too many medical bills, not buying luxury items.

      Your example of the borrower is odd for two reasons. Not allowing people to file for bankruptcy will simply force more home foreclosures (it is already happening in huge). Borrower A will lose even more money if his neighbors lose their home to foreclosure because foreclosed homes sell for much less driving down "comps" used for determining home value.

      The fact that borrower A lost money is very troublesome, and maybe there should be some way to assist borrower A, but I can assure you having all the borrower B's foreclosed on out some moralistic view of the "bad shall be punished" will only make A's situation worse.

      Concerning borrower's plans, under the new legislation, they would and cannot specific the interest rate, and even under the old legislation, the plans must be approved by the court.

      Your last paragraph continues on the same moralistic perspective – let the "bad" people get what they deserve. The same argument was made by the Hoover administration, and that turned out very poorly.

      Finally, everybody against this legislation, metaphorically shakes their heads, and like you, says, "Something needs to be done." For all your attacks, you have not come up with a comprehensive, better idea. If this plan is so bad, let's see your better plan.

      M

    4. Chris, Detroit says:

      To Eric,Ca.

      Thank You.

      Excellent assessment, right on analysis of the real consequences of that bill as is.

    5. Andy M, Granite City says:

      Hogwash. Everyone of us who suffered a 40% or greater loss of our DOW portfolio; everyone of us who suffered a loss of market value of our home and business property; everyone of us who live in neighborhoods destabilized by the mortgage mess; everyone of us who does not have a subprime loan but still lost a job due to the economic recession; everyone of us who wonder who will be next in the unemployment line; we are all the victims of the mortgage mess, of the toxic loan products pushed on homebuyers and securitized and sold on Wall Street.

      None of us caused this mess yet we are all suffering. We are the victims and we need relief.

      We need Bankruptcy Judges to bring non-performing loans back into performing loans. None of the government programs offered during the last year are solving the problem. Bankrutpcy mortgage modification is only temporary, it only has a shelf life as long as subprime loans exist and it will not affect new loans.

      Everyday I hear radio and television commercials touting new loans at record low interest rates. Lenders are not afraid to advertise for new business. Modifying a few loans in bankrutpcy will not sink the mortgage industry. The mortgage industry sank the whole world economy.

      Letting a few judges solve a few subprime loans and prevent further foreclosures is just one small piece of the solution. Why dont we at least try and see what happens.

      We are victims and we need mortgage relief, now.

    6. JK, Currituck, NC says:

      Thanks for a good analysis. It's incredible that the administration is clueless about the fact that it is cutting the housing and consumer markets off at the knees. It cannot continue to ignore responsible homeowners, the only segment in the housing market that can actually contribute to rebuilding the real economy–so long as they are not totally devastated by worthless Robin Hood schemes. Here — "Who the Mortgage Rescue Plan Won't Help and Why that Stinks for the Economy" — http://www.associatedcontent.com/article/1518722/

    7. Lynne B, Reno NV says:

      If I am wealthy, and have more than one home, it is my understanding that I can restructure the mortgage on my second, third, and fourth homes through the BK court- why is that 'ok' but it is not ok to allow homeowners to do so for their ONLY home…I can't help but wonder if the ultra wealthy in this country are waiting for homes to be worth 20% of what they were 5 years ago so that they can scoop them up as investment rental properties and rent them at exhorbitant rates…I'm sorry but I have had it with free market economics, and tax breaks only for the wealthy.

    8. Karl S, San Jose, CA says:

      Great points by all sides but the reality in my neighborhood is that those of us paying our mortgage on time and having put 20% plus down are now suffering because foreclosed homes are being sold by the banks at 50% of what we paid in April 2005. Many of these foreclosed homes would not be on the market if a judge could adjust the payment/principle in the same way they do when a corporation goes into bankruptcy. If the judge could have adjusted the payments and principle (just as is done when say United Airlines or US Air or dozens of others) most of these these people would still be in their homes today and the market would not have crash to where it is today. Granted, many of these people should not have been given loans but the reality is they were and now those of us that put 20% down-plus are still $150K or more underwater on the mortgage and there is little hope that the housing market will recover anytime soon. Now people that had good credit, had put down payments of $120,000 – $200,000, and have been paying their mortgage are questioning why they should keep paying. If the home you purchased for $700,000 is now worth $350,000 because the banks keeps selling the foreclosed homes around you it becomes a business decision.

      We owe $550,000 on our home, we $700,000… what hope do we have of seeing a penny of our $150,000 down payment in the next 10 to 15 years when we had hoped to be retired? From a number crunching standpoint it makes more sense to stop paying and walk away when the bank sells the house for $350,000. Why not just start over? In two years you buy your old house back for $500,000 and you would still be way ahead of staying in your home and paying the mortgage. How much is good credit worth? If you walk away your credit rating is shot but if you stay you continue to loose money.

      We did everything by the book except perhaps buying near the high point in the market but a new job forced a move and we needed a place to live, our down payment came from our house of ten years and now that is gone. We can't refinance since we owe $550,000 and the value is only $350,000 to $390,000. I have been offered a higher paying job elsewhere… but am stuck unless we walk away.

      Is allowing the judge to make changes to the mortgage fair? No! But it is preferable to more foreclosures that just drive down the market further since I can guarantee, at least in my neighborhood, that there will be a new wave of foreclosures on folks with good credit who just can't take it anymore and will walk away to cut their losses.

    9. EW, Michigan says:

      Why is the bankruptcy option available only to owners of second or third homes? Current bankruptcy law can modify those mortgages but not on a primary residence? The homeowners of second or third homes sometimes have mortgages also and upon filing bankruptcy, obtain modification and as a result, changes to the original loan as well. The logic applied to 2nd or 3rd homeowners should be applied to the primary residence homeowner.

    10. Karl S, San Jose, CA says:

      100% agree! If a corporation that owns multiple units can have the judge reorganize the debt, including the mortgages why would that same option be afforded to individuals and families? Are corporations or those that own multiple homes more deserving of protection under the law?

      I have no plan to file for bankruptcy but I know I have neighbors considering this, not because they cannot pay their mortgage but because they owe so much more than the home is worth. Since they have no equity left and their savings went into purchasing the home they have no reason to stay…. and this is going to further depress prices in our zip code. If the principle/payments can be changed then they would go with Chapter 13 and stay in the home. This could be more profitable for the bank than the owner filing Chapter 8 liquidation… in the case we all loose, the bank and the neighbors. If the owner walks away with Chapter 8 the bank sells the home at a HUGE loss and the price of nearby homes lose value and so more people decide to give up their home because they are underwater with little hope of recovery in value over the next 10 years.

      Change the law or watch more and more responsible homeowners get suck done with the irresponsible as the home values plummet further and further down.

    11. Jan Strain, Denver, says:

      Michael in Brentwood – the actual voice of reason…I have too often heard the rantings of unknowledgeable people parroting the talking points of conservative lobbyists and lenders. No research, no reality and no knowledge.

      Most of the Congress who voted IN Gramm-Leach-Bliley and followed suit with writing the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 were supporters of the industry that CREATED the foreclosure nightmare.

      The Heritage Foundation is very much in lock step with many of those who dismantled the oversights and allowed the so-called "free market" to gobble up small banks, real estate companies and insurers creating the large Trusts and Monopolies of today that are now failing and flailing.

      The homeowner of yesterday that gutted the house then stuck it to the lender is NOT the bankruptcy/foreclosure of today.

      Many, if not most, are families who worked hard to scrape together enough to afford the American Dream promised to them by the last administration and bought into the over-rated credit their lender created. People working 2 jobs who have lost one or both, people who have taken pay cuts in order to keep their job, people experiencing a catastrophic illness of a loved one and is under insured or has their claims disallowed for one reason or another; people who have lost their nest egg in a volatile market, a 401K down the drain, a pension cut out, a scam artist theft (Madoff)or simply were lied to or a victim of fraud.

      I work with them daily and most have no options, some working 2 or 3 jobs JUST to keep food on the table. NONE of them ever thought it could happen, they were PROMISED it NEVER would happen.

      Properties worth up to 1/2 of what they were worth 2 years ago – Loans given at 100% cannot be refinanced when the house and property are worth only half of the value. Lenders, many of them, did it to themselves. Refusing to believe that the crash would happen. Refusing to look at the history of real estate, the stock market, the economy. WE go through adjustments every few years so everything could catch up.. The longer the period of boom, the bigger the bust. 15 years of MANIPULATED boom by speculators and con artists with the help of greedy corporatists and the politicians in their pockets, you better beleive there would be a heck of a hangover.

      I have been in the profession for nearly 30 years working in CA, CO, MO, VA,and OK. Of all those states, CA has the best laws but they are still lacking so the fraudulent practices continue. Predatory lending is not a minor issue. IT IS the issue and there are still no oversights!

      Many predatory lenders (and there are SO many more than you even know about) go Scott free.

      Since the late 90's, the only oversights left are the very few on federally insured banks.

      Countrywide, GMAC, and a host of others have virtually no oversight and those companies grew faster from deregulation than any other corporation. Insurance companies bought brokerages, title companies and lenders steering each arm to another arm of the same company and is there any wonder why they are in trouble…but they are now "too big to fall" so we have to bail out the crooks who bled us dry in the first place and unfortunately, members of the heritage Foundation have a vested interest in leaving everything as the status quo, right Mr Forbes?

    12. mephistopheles says:

      Of course everybody as usual, leaves out the primary factor.

      Fractional reserve banking is a musical chairs operation and the music has stopped. Let the banks FAIL!! If you added up all the bad mortgages, and did the math on what any participating bank could in turn lend against the signatures on the loans please show us how a bank could really lose.

      http://www.youtube.com/watch?v=cy-fD78zyvI

      http://www.lewrockwell.com/rothbard/frb.html

      http://en.wikipedia.org/wiki/Fractional-reserve_b

      Once people learn that our currency really has no backing, we can then begin to find a solution. The present system is mathematically unsustainable.

      All the FEDS bailout has done is replenish the immediate coffers of banks for their own discretionary spending. Almost none of it has been "lent out". The media's culpability is repugnant in too many ways to comment on here. "Subprime loans"

      were a mere fraction of the problem, yet they repeated it as if it were a holy mantra over and over and over.

      Think about it: a borrower defaults, the bank has to resell it and has the right in most states to establish a bottom price for the property. It has collected interest, origination fees, and other novelty charges for the active term of the loan. But wait…under the FRB system they have "lent out" 8-10 times the amount of this same loan at interest, while they never had the

      actual funds to do so in the first place, hence the "fiat money supply" in use in the US to this day. So they can sell the property and continue collecting interest on the original loans fractionally multiplied new loans as well. There is NO COLLATERAL for this fiat money! There couldn't be, it is mathematically impossible. Your signature allows them to lend out 8-10 times the note…AT INTEREST!

      Please research this yourself. There can be NO solution until every American is aware of this scam. If our money wasn't so funny, there would not be the domino effect of bank and stock scams prevelant today. The simple fact is, there is not enough real money to pay off the funny money….ever. Under the current monetary system there never will be. Let that sink in.

      THE DEBT ON US CURRENCY CAN NEVER BE PAID OFF…..EVER.

      Again please research this yourselves. Living in denial and listening to proposed legislation will do absolutely nothing.

      The truth is painful, Amercans have been scammed. The music has stopped and there is nowhere left to sit.

      If people had jobs…they would pay their bills.

      The only thing manufactured in the US anymore is debt, and debt instruments….oh yeah, and weapons.

    13. kathy says:

      I do not understand why anyone in there right

      mind would be against this bill. It will empower

      the average person, and the poor to help themselves. Our economy is entering what I feel is a Depression, because of the housing crisis.

      How much worse does it have to get before, Republicans, and lobbyist, Blue Dog Dems know

      that they are the problem. The Republicans

      and banks caused this problem, and now there

      is someone in the white house that cares!!!!

      Thank you President Obama. I hope bankrupcy

      reform will pass.

    14. Pingback: Preventing Foreclosures - Why the Delay? : Republic

    15. Ellen, FL says:

      Michael and Karl — thank you for excellent points. Karl, I especially appreciate that you pointed out that if this had been in place a year or two ago many of the homes that went into foreclosure would not have. Here in FL there are so many foreclosures that our home values have plummeted. Responsible borrowers are paying for that every single day.

      Bankruptcy is not an easy out for these borrowers — especially not now thanks to BACPA. Spend one day in a bankruptcy court and you'll see how "easy" the decision to file is.

      I firmly believe the banks will end up ahead if a borrower starts repaying the loan (even at a reduced amount) than if they let another home go vacant, become vandalized, and then languish on the market for only-God-knows how long.

    16. Used to be Republica says:

      Has anybody read the text from the introduction of HR 1106 in congress on Feb 26th? Here it is "http://www.govtrack.us/congress/bill.xpd?bill=h111-1106&tab=speeches". Take a look at the blatant lies and false statements the republican party expresses. They are trying to raise the monster they created with the wallstreet "bailout". Suggesting that they're bailing out people in bankruptcy. I can bet most of them and their rich wallstreet cohorts have a second or vacation home that they'll get crammed down under current bankruptcy law. This is an equalizing bill. It gives us with only one home the same benefits as the wealthy. Vote for this and never vote republican again! Vote out the blue dogs next time around!

    17. Jonathan, WV says:

      Good points by many of you. The one thing we all need to remember is the reason we are in this absurd situation. We are here because there are politicians who believe that a "Utopian" society can be achieved through government regulation or mandation. We have to remember that Jimmy Carter and the Democrat Community Reinvestment Act forced local banks to make risky loans, usually ones in "Red Lined" areas.

      Fannie and Freddy would purchase these debt assets knowing the high risk. The people do not pay the bills, the debt build up, the company spends money that it doesn't have or is secure, and the company fails.

      I see the same thing happening to local radio stations. localism will be implemented, people will be placed on the air-waves, audiances will leave, and this form of media will fail.

      Both situations are similar to this so important quote,

      "One of the methods used by statists to destroy capitalism consists in establishing controls that tie a given industry hand and foot, making the industry unable to solve its problems, then declaring that freedom has failed and stronger controls are necessary." –Ayn Rand

      So much is said here in one sentence that properly describes what is happening. The government tries to dictate and "equal" the playing field but in the end destroys the element it tries to save.

      Now the President is allowing judges to set the agenda for borrowers transforming them into a high risk asset for the lender. Does this apply to everyone? No, in fact this only applies individual underwater $730,000. This is enforcing poor behavior for Americans. When the President annouced this grand plan, the number of late morgage payments jumped. When the government was passing out money with no strings attached, did we not see businesses and states come crawling to Washington for their share? You bet we did. They basically formed a soup line.

      Know how the New Left works, "One of the methods used by statists to destroy capitalism consists in establishing controls that tie a given industry hand and foot, making the industry unable to solve its problems, then declaring that freedom has failed and stronger controls are necessary."

      Know what you are facing.

    18. Jonathan, WV says:

      "Used to be Republican in KY"

      This is a bailout and people who were given loans and have failed, rich or poor, do not deserve to be bailout by you or me. I pay my morgage and I am certainly not rich. Why should I have to pay for others who did not pay theirs? It is not my fault. You say it is not a "bailout," are they using tax payer money to do it? Yes, and people are being rescued who through themselves into the pool not knowing how to swim. I don't blame people for their mistakes but I do ask that they pay for them.

      This hurts business and awards bad behavior. I wouldn't do the same in my classroom. There would be a riot. Why would I want politicians, the ones you trust and put your faith in, to the same?

    19. Philippe, Chicago says:

      Had the Obama Administration used the trillion dollars in stimulus money to pay down principal of underwater mortgages instead of using the economic crisis to push its long term spending objectives, it could have done quite a but to alleviate the root causes of our current crisis.

    20. NOW IS THE TIME TO C says:

      TO ALL PEOPLE IN FAVOR OF HR 1106… THE HOUSE PASSED THE BILL AND.. DID THEIR JOB ON MARCH 5TH! PRESIDENT OBAMA HAS ALREADY SAID " I WILL SIGN THIS BILL "HELPING FAMILIES SAVE THEIR HOMES" ASAP AND MAKE IT LAW"…..THE ONLY HOLD-UP IS YOUR… " US SENATE ". 60 VOTES ARE NEEDED FOR HR 1106 TO BE PASSED. IT IS AT LEAST 10 VOTES SHORT AT THIS TIME OD 4/3/2008 AND THE SENATE IS IN RECESS FOR 2 WEEKS. WHEN THE SENATE RETURNS..THIS BILL WILL BE ONE OF THE FIRST ITEMS ON THE AGENA. WE NEED TO GET 60 VOTES IN SUPPORT… AND IT CAN BE DONE, BUT NOT BY SITTING AROUND DOING NOTHING ABOUT IT ! THIS IS WHY ! THE (SUPPOSED BROKE) BANK INDUSTRY IS SPENDING MILLIONS TO LOBBY TO ATTEMPT AND DEFEAT THIS BILL IN A FINAL STAND IN THE US SENATE ! BY USING THE MILLIONS THAT "YOU " THE TAX PAYER BAILED THEM OUT WITH ! AND YES, IT SHOULD MAKE YOU ANGRY ! THIS IS THE LAST STEP TO FINALLY ENDING THIS NIGHTMARE FINANCIAL CRISIS. DON'T LET THIS OPPORTUNITY SLIP AWAY. IF YOU CARE..AND YOU DO OR YOU WOULDN'T BE ON THIS WEBSITE, " MAKE YOUR VOICE HEARD". NOW..IS THE TIME TO DO THE MOST WITH IT. DURING THIS 2 WEEK RECESS… TOGETHER WE CAN PILE UP AND OVERWELM THE SENATORS WITH, EMAILS, CALLSA, LETTERS, DRAW ATTEN. AND SUPPORT BY "DEMANDING" NOT ASKING TO GET THE JOB DONE AND SUPPORT HR 1106 AND SENATE VERSION S.61. THIS BILL IS NOT A MONETARY BAILOUT, BUT SIMPLY CHANGES THE CHAPTER 13 BANKRUPCY LAW TO GIVE JUDGES THE POWER TO MODIFY MORGAGES. THIS WILL MAKE BANKS OFFER "GOOD MODIFICATIONS" AND TO BE AGRESSIVE TO WORK WITH HOMEOWNERS.. OR FACE THE REAL POSSIBILITY OF A JUDGE.. REDUCING THE LOAN TO CURRENT VALUE, OR A JUDGE MAKING HIS MODIFICATION…. WHICH BANKS FLAT OUT FEAR..THEN AND ONLY, THE BANKS WILL BEGIN TO MAKE GOOD MODIFICATIONS, WHICH UP TO TODAY ARE SIMPLY NOT DOING THEIR PART AND DRAGGING THEIR FEET, LETTING HOMEOWNERS LOSE THEIR HOMES, AND NOT REALLY REDUCING PAYMENTS.. WHICH ACCOMPLISHES NOTHING. IT ONLY TAKES A FEW MINUTES OF YOUR TIME, BUT COULD MEAN A LIFETIME OF PEACE OF MIND AND HAPPINESS IN THE LONGRUN. TAKE THE TIME TO CONTACT AND MAKE YOUR VOICE HEARD!!!! IT IS SIMPLE " GOOGLE" YOUR STATE AND US SENATORS. ALSO ANY OTHER STATE YOU CHOOSE AND US SENATOR, IT WILL LEAD TO HIS OR HER WEB SITE. FOR THE MOST PART IT IS SUPPORTED BY DEMOCRATS. BUT WE NEED BOTH DEMOCRATS AND REPUBLICANS AND THIS IS NOT A PARTY LINE ISSUE AS AND IS A AMERICAN CRISIS ISSUE. (REMIND THEM) PEOPLE FACING LOSING THEIR HOME ARE NOT SEPARATED BY DEM/REP PARTY LINES, THEY ARE AMERICANS..IN MANY STATES WITH HIGH FORECLOSURE RATES, 1 OR BOTH SENATORS ARE REPUBLICAN. TELL THEM TO NOT TURN THEIR BACK ON YOU AND BE BOUGHT OFF BY THE PEOPLE WE BAILED OUT!…WORKING TOGETHER IN NUMBERS AND BEING LOUD AND DEMANDING. WE CAN MAKE THE DIFFERENCE, THIS IS THE LAST STEP. LETS GET IT DONE!

    21. Dwizz / N.C. says:

      I understand both sides of the argument, bailout the homeowners or not. But i would like someone to explain that while the lenders are not responsible for the fraudulent loans then why not bailout the mortgage brokers and the borrowers, because the government sent money that belonged to the tax payers and bailed out the banks. Or maybe i said that wrong,the government sent the banks money and they just hoarded it. They haven't helped a single taxpayer with those billions that they received.So tell me why and how the lenders can be hurt when they have already been compensated for what little interest they will loose by letting home owners modify their home loans. So basically what the lenders need to do is to spend the money that we gave them for what it was intended for, to sure up the economy by halting the fast falling foreclosure market and to buy back these toxic assesses. And if they would uses the money that was giving to them then our homeowners would not have to seek shelter under the bankruptcy laws. I think that it is very sad for our government to keep bailing out these failing banks, vehicle manufacturers and financial institutions so freely but want to stop short and haggle over helping our fellow citizens that paid their taxes only to see them go towards helping everyone but themselves. And i pity all of you, regardless of how you feel, that will protest and leave messages on these various sites suggesting that we not help citizens that are in trouble of loosing their homes even if it was their fault. We spend trillions each year helping other countries and bring our dead home daily because we were helping others to live a better life. But screw our USA citizens, just keep paying your taxes so our government can ship it overseas to help someone else. You Americans that post against your fellow citizens trying to get help is just so appalling. You are kicking your neighbor in the tale when they are already down. PLEASE GET SOME KIND OF HELP, because it seems that something is seriously wrong with your thought process.

    22. Dwizz / N.C. says:

      I understand both sides of the argument, bailout the homeowners or not. But i would like someone to explain that while the lenders are not responsible for the fraudulent loans then why not bailout the mortgage brokers and the borrowers, because the government sent money that belonged to the tax payers and bailed out the banks. Or maybe i said that wrong,the government sent the banks money and they just hoarded it. They haven't helped a single taxpayer with those billions that they received.So tell me why and how the lenders can be hurt when they have already been compensated for what little interest they will loose by letting home owners modify their home loans. So basically what the lenders need to do is to spend the money that we gave them for what it was intended for, to sure up the economy by halting the fast falling foreclosure market and to buy back these toxic assesses. And if they would use the money that was giving to them then our homeowners would not have to seek shelter under the bankruptcy laws. I think that it is very sad for our government to keep bailing out these failing banks, vehicle manufacturers and financial institutions so freely but want to stop short and haggle over helping our fellow citizens that paid their taxes only to see them go towards helping everyone but themselves. And i pity all of you, regardless of how you feel, that will protest and leave messages on these various sites suggesting that we not help citizens that are in trouble of loosing their homes even if it was their fault. We spend trillions each year helping other countries and bring our dead home daily because we were helping others to live a better life. But screw our USA citizens, just keep paying your taxes so our government can ship it overseas to help someone else. You Americans that post against your fellow citizens trying to get help is just so appalling. You are kicking your neighbor in the tale when they are already down. PLEASE GET SOME KIND OF HELP, because it seems that something is seriously wrong with your thought process.

    23. Dan says:

      Bottom-line, this blog post was written by a fat cat banker or investor!

    24. Wayne, Louisiana says:

      This is not written by a banker or investor. I believe the article alludes to the fact that actions have consequences. In this case, many responsible home buyers will end up paying a larger percentage of their income for other irresponsible citizens. Why should some people loose their homes because of rules or laws that force them to pay unexpected costs?

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