Nov 30, 2009
The New York Times story on the Obama administration’s campaign to pressure mortgage companies to make affordable loan modifications contains this sentence, buried deep in the text:
“Some Democrats say the time has come to reconsider a measure opposed by the Obama administration: giving bankruptcy judges the right to amend mortgages as a means of pressuring lenders to extend reductions.”
Dean Baker points out that if this is true, it is big news.
Obama supported the “cramdown” proposal on the campaign trail last year, and in February he initially included it as the “stick” to go with the “carrot” of incentive payments in his Making Homes Affordable program, but it didn’t make the final cut. Housing advocates have criticized his program as executed, sans cramdown, as inadequate precisely because it relied solely on voluntary participation by lenders; time seems to have borne this out.
But, as Progress Illinois (which has followed this issue closely) phrased it, Obama has exhibited a “reluctance to spend political capital” for the proposal.
In January he convinced chief sponsor Richard Durbin to remove the measure from the stimulus bill, in order to make passage easier; in May the White House offered no support when Durbin’s bill went down to defeat, with 12 Democratic senators voting the way the banking lobby asked them to.
Now the Obama administration is planning a “campaign” that will publicly name institutions that are moving too slowly on making loan mods permanent, hoping they’ll respond to the threat of embarrassment. Really? Banks? Embarrassment?
The Center for Responsible Lending projects 9 million more foreclosures in the next three years, and if that happens, there isn’t going to be much improvement in the economy (except maybe for banks) for a long, long time.