Obama Proposes Moratorium on Foreclosures
While Senator John McCain is urging the government to buy bad home loans, inadvertently making taxpayers pay for the difference between these and the homes’ new values, Barack Obama is proposing a 90-day foreclosure freeze and encouraging the Treasury Department to work with various government agencies to help families in danger of losing their homes to foreclosure.
Obama’s proposal would allot $10 billion as a safeguard against foreclosures and an $800 mortgage tax credit per year for homeowners who fail to itemize their deductions. The plan would allow the Bankruptcy Court to alter mortgages on primary residences, a proposition which past bills have been unsuccessfully pushing for in Congress.
Dean Baker of the Center for Economic and Policy Research, says that government should change the law, allowing judges of the Bankruptcy Court to adjust primary residences’ mortgages and terms of homeowners’ other debts.
Last October, Congress invested $300 billion in Bush’s unsuccessful housing program under the FHA, the Hope for Homeowners. The program encourages homeowners to apply for refinancing of their unsettled mortgages. In its first year, 13,300 homeowners will have been helped, a far cry from the targeted 400,000 homeowners in over a three-year period.
Since then, new programs have been proposed to the Treasury Department by large lenders such as JP Morgan Chase and the Bank of America. Reports that a mortgage-industry plan is being considered by the Bush administration have yet to be confirmed.
As expected, Democrats have been largely in favor of Obama’s proposal, but experts are hardly enthusiastic. According to bankers and mortgage trade groups, the plan would destabilize the market and would benefit only a minority. They say that tax credit would only help people who have already been homeowners for years. Baker himself adds that the government should help out those who are struggling to pay their mortgages, rather than those who are not.