Obama Urges Bernanke, Paulson to Fight Foreclosures, Hold Homeownership Summit

Obama Senate Website ^ | 3-22-07 | Barack Obama

[Brookhaven]

Obama Urges Bernanke, Paulson to Fight Foreclosures, Hold Homeownership Summit Thursday, March 22, 2007 Printable FormatFOR IMMEDIATE RELEASE Contact: Ben LaBolt

WASHINGTON, DC -- U.S. Senator Barack Obama today sent a letter to Federal Reserve Chairman Bernanke and Treasury Secretary Paulson urging them to immediately convene a homeownership preservation summit with key stakeholders to fight foreclosures driven by growth in the subprime mortgage market.

[Brookhaven]

This is the letter Obama has been beating Republicans over the head with saying he warned about the financial crisis. Even the headline on Obama's site doesn't say that. When you read the letter you realize it is anything but a warning about a financial meltdown (it is also interesting that it seems impossible to find via a search engine, does google not index Obama's site?)

Anyway, here is my breakdown of the letter

Dear Chairman Bernanke and Secretary Paulson,

There is grave concern in low-income communities about a potential coming wave of foreclosures. Because regulators are partly responsible for creating the environment that is leading to rising rates of home foreclosure in the subprime mortgage market, I urge you immediately to convene a homeownership preservation summit with leading mortgage lenders, investors, loan servicing organizations, consumer advocates, federal regulators and housing-related agencies to assess options for private sector responses to the challenge.

Obama recognizes it is a regulation problem, but what are the problem regulations that are causing the foreclosures? Obama never does answer that question.

We cannot sit on the sidelines while increasing numbers of American families face the risk of losing their homes. And while neither the government nor the private sector acting alone is capable of quickly balancing the important interests in widespread access to credit and responsible lending, both must act and act quickly.

This is where Obama states the problem. Is the problem that the market might meltdown? No. The problem Obama is concerned about is people losing their homes.

Working together, the relevant private sector entities and regulators may be best positioned for quick and targeted responses to mitigate the danger. Rampant foreclosures are in nobody’s interest, and I believe this is a case where all responsible industry players can share the objective of eliminating deceptive or abusive practices, preserving homeownership, and stabilizing housing markets.

Obama warns us about a danger that must be mitigated. Is the danger a market meltdown? No. The danger is the rising number of forclosures.

The summit should consider best practice loan marketing, underwriting, and origination practices consistent with the recent (and overdue) regulators’ Proposed Statement on Subprime Mortgage Lending. The summit participants should also evaluate options for independent loan counseling, voluntary loan restructuring, limited forbearance, and other possible workout strategies. I would also urge you to facilitate a serious conversation about the following:

Obama proposes a summit to discuss loan practices. Then he talks specifics.

What standards investors should require of lenders, particularly with regard to verification of income and assets and the underwriting of borrowers based on fully indexed and fully amortized rates.

This sounds good, but what does he mean by this. Does he mean they should be tightened or loosened (to encourage more lending)?

How to facilitate and encourage appropriate intervention by loan servicing companies at the earliest signs of borrower difficulty.

Again it sounds good, but what does he mean by intervention. According to Biden during the VP debate it means adjusting the interest rate and the principal DOWN.

How to support independent community-based-organizations to provide counseling and work-out services to prevent foreclosure and preserve homeownership where practical.

In other words, he wants to funnel more money to ACORN. One of the organizations that cause the financial mess in the first place.

How to provide more effective information disclosure and financial education to ensure that borrowers are treated fairly and that deception is never a source of competitive advantage.

Everybody can support that, but what does he mean? Telling people they can afford a home loan they have no chance of playing back would seem to be deceptive. Is that what Obama means?

How to adopt principles of fair competition that promote affordability, transparency, non-discrimination, genuine consumer value, and competitive returns.

Another statement that everyone would agree with, but about as specific as saying you favor pie (is that apple, peach, cherry, cow pie you favor?)

How to ensure adequate liquidity across all mortgage markets without exacerbating consumer and housing market vulnerability.

There it is: liquidity. Obama can offically say he warned of a liquidity crisis. But the liquidity crisis he is worried about doesn't seem to be the one we are dealing with today. He seems worried that there won't be enough money to continue to make sub-prime loans. No mention anywhere that a liquity crisis could lead to a stock market meltdown (in fact, no mention of the stock market in the entire letter.)

Of course, the adoption of voluntary industry reforms will not preempt government action to crack down on predatory lending practices, or to style new restrictions on subprime lending or short-term post-purchase interventions in certain cases. My colleagues on the Senate Committee on Banking, Housing and Urban Affairs have held important hearings on mortgage market turmoil and I expect the Committee will develop legislation.

It is buried in a compound sentence, but Obama makes it perfectly clear. Nothing should be done to restrict sub-prim loans.

the adoption of voluntary industry reforms will not...style new restrictions on subprime lending

Obama's famed "warning letter" is actually warns that NOTHING should be done to eliminate the root cause of the financial crisis: sub-prime lending.

Nevertheless, a consortium of industry-related service providers and public interest advocates may be able to bring quick and efficient relief to millions of at-risk homeowners and neighborhoods, even before Congress has had an opportunity to act. There is an opportunity here to bring different interests together in the best interests of American homeowners and the American economy. Please don’t let this opportunity pass us by.

Obama calls for groups like ACORN to get involved in solving the crisis. He then states the purpose of this letter: bring relief to homeowners. To get the government involved in helping people who can't pay their mortgages.

Sincerely,

U.S. Senator Barack Obama

The bottom line is that even the most casual reading of this letter would make people understand that Obama DID NOT warn of the meltdown of Fannie and Freddie or of the current financial crisis.

Obama, in fact, seems concerned that the rising number of people defaulting on sub-prime loans is causing lenders to be more reluctant to issue MORE sub-prime loans. Far from a warning that would have fixed the current problem. Had Obama's advice been followed, the current crisis probably would have been WORSE.

[BGHater]

No doubt the lady who tried killing herself because of foreclosure will come up in the debates.

[DoughtyOne]

Vote for me and I won't just give you more token handouts, I'll pay the mortgage on your property.

I am Barack Obama, and I have approved of this bribe message.


Well folks, we've been at this for five days now and we're up to 27% of our goal as of 1:01am on the sixth of October.  This shouldn't really take more than a week to
conclude.  It's the fourth quarter of 2008, and it's time to take care of our obligation to Jim and John, ourselves, and to our fellow forum participants.  If you've already
contributed, you may want to consider sharpening your pencil.  Lets not keep the FReepathon in limbo.  Lets wrap this up.  Thanks for your support.  Click the pencil.

[Parmenio]

He wants to bail out the Welfare Queens.

[stylin19a]

Because regulators are partly responsible for creating the environment ...

I wonder who the other "partlies" are in the "partly" part.

[Political Junkie Too]

I'm so confused...

How does this bailout work if we can't foreclose on the homes, and give the mortgages to the feds to resell to people who can afford them?

Isn't that the premise? I didn't think it was for the government to take over mortgage payments for people who can't afford their homes, and then still keep in the homes forever.

-PJ

[manc]

I know a guy who got a 5 bedroom 2 and a half bathroom and attached garage.
He got his interest rate half of mine, he had alright credit I had great credit

I bought 3 bedroom small house, small home but that is all I knew I could afford.
I have a wife and 3 kids

My house is now paid off in a few years he looks to be losing his despite him getting these special programmes

he is now claiming racism on some of those elected as he stands to lose his home. He claims it was their fault and that he should be bailed out as he has a wife and one kid.

He makes more than me due to his job, affirmative action I might add.

Now I see no reason at all why I should now have my money to pay off his house while I forgave a lot of vacations, eating out, took self responsibility.
He drives a Lincoln navigator I have a mini van

fed up of these people who have their little nice programmes.

[LeonardFMason]

A SUMMIT? How about a COMMISSION. No....Make it a BLUE RIBBON PANEL. What a clown.

[Anima Mundi]

And shall we inform all of those Obama crazed young people now or later that THEY are permanently shut out of home ownership?

The homes are not now and NEVER WERE worth the amounts paid. The so-called “value” was artificially inflated with hordes of unqualified buyers getting loans they could not otherwise get.

So...we keep people in the home who can’t afford it and shut out the people who could afford it if it were at the true market value.

Let’s just repeat the mistake and take it up a notch and keep the insanity cycle going. That is their “answer”. Are they evil or stupid?

[ABQHispConservative]

Well then, perhaps 0bama should suspend HIS campaign. Seeing how apparently 0bama can’t multitask either.

[LilRhody]

Here in RI, a couple is complaining about foreclosure. They have a combined income of 18,000, 5 kids. They bought two properties valued combined $600,000.

My son came back home to live. Made a bedroom in the basement for himself, and saved for two years every single penny he could to put a down payment on a home. His rents were climbing so high he knew he had to buy his own place. Well, he did. A modest home that he could afford. I’m supposed to feel sorry for these people who know enough to buy a home and then complain that they can’t pay for it? Now I understand they are going to complain to the utility and oil/gas companies for help because of their problem. The advocates for them are out there getting the ball rolling for them.

[LilRhody]

Here in RI, a couple is complaining about foreclosure. They have a combined income of 18,000, 5 kids. They bought two properties valued combined $600,000.

My son came back home to live. Made a bedroom in the basement for himself, and saved for two years every single penny he could to put a down payment on a home. His rents were climbing so high he knew he had to buy his own place. Well, he did. A modest home that he could afford. I’m supposed to feel sorry for these people who know enough to buy a home and then complain that they can’t pay for it? Now I understand they are going to complain to the utility and oil/gas companies for help because of their problem. The advocates for them are out there getting the ball rolling for them.

[Brookhaven]

I can tell people are not reading the letter and comments (probably too long, I understand), but you should.

Buried in the middle is a call from Obama to restrict any attempt to reign in sub-prime loans.

This is not a letter warning about the current financial crisis. The Republicans need to get this out there. Obama is getting a free ride by saying he warned about the current financial crisis. He didn’t. His advice would have made the current crisis WORSE.

[popdonnelly]

I never assumed I had a right to own a house. I always figured I had to earn the money to pay for it. Not so today.

[mlocher]

I never assumed I had a right to own a house.

These are the words Obama will hear. We will follow up with, "Yes, you are correct. The gov't should own the house you live in."

[Sacajaweau]

LET THEM RENT....

Owning a home comes with obligations and everyone is treated equally...Pay or get out.

[girlangler]

From an email I just received:

In the last couple of days, we’ve seen Nancy Pelosi, Obama, Bonnie Frank, and every other hate American people talking head on TV trying to blame George Bush for all the financial upheaval of Fannie, Freddie, AIG, Lehman, etc.

As a result, you might be asking, “Who oversees these things? Who is in charge of regulating the marketplace? Isn’t there some government agency that should have been able to see what was happening long ago and taken some kind of steps to stop it?”

Well, yes. In fact, both the US Senate, and the House of Representatives have committees that are there for just this kind of thing. So, who’s in charge there? Who should be held accountable?

The United States Senate Banking Committee : Committee Chairman, Christopher Dodd, (D)

Subcommittees of the U.S. Senate Committee on Banking, Housing, and Urban Affairs and Subcommittee Chair:
Securities, Insurance, and Investment - Jack Reed (D-RI)
Financial Institutions - Tim Johnson (D-SD)
Housing, Transportation, and Community Development - Chuck Schumer (D-NY)
Economic Policy - Tom Carper (D-DE)
Security and International Trade and Finance - Evan Bayh (D-IN)

The House Financial Services Committee:

Chairman Barney Frank (D-MA)
The United States House Committee on Financial Services (or House Banking Committee) oversees the entire financial services industry, including the securities, insurance, banking, and housing industries. The Committee also oversees the work of the Federal Reserve, the United States Department of the Treasury, the U.S. Securities and Exchange Commission, and other financial services regulators.

Subcommittees and Subcommittee Chair:
Capital Markets, Insurance - Paul Kanjorski (D-PA)
Financial Institutions and Consumer Credit - Carolyn Maloney (D-NY)
Housing and Community Opportunity - Maxine Waters (D-CA)
Domestic and International Monetary Policy - Luis Gutierrez (D-IL)
Oversight and Investigations - Mel Watt (D-NC)

Happen to notice anything in common among these people (thieves, crooks and socialist engineers) who oversee the industry... yeah once again it’s all Bush’s fault.

[Gator113]

Hey Obama, how about a compromise. Hand out free sheets of poly sheeting / visqueen and used shopping carts.

[Peter Horry]

Pay or get out, don’t you think that is a bit harsh pardner.
I have heard that Obama has a nice new home, I bet he could take this family in. Heck, I’ll bet Barbara Streisand, and many others, could house more than one family. These are hard times folks, we need compassionate solutions.

[hunter112]

I didn't think it was for the government to take over mortgage payments for people who can't afford their homes, and then still keep in the homes forever.

Don't think of it as a bailout, think of it as 'reparations'.