House May Tighten 'Cramdown' Measure

Source: The Wall Street Journal

WASHINGTON -- House Democrats are discussing a new restrictions to a controversial measure that would allow strapped borrowers to have their mortgage debts reduced in bankruptcy, people familiar with the matter said.

After pushing a set of changes last week, lawmakers are discussing whether to tighten language in the legislation to clarify that Chapter 13 bankruptcy is a last resort only after efforts at voluntary mortgage modifications fail.

The negotiations are designed to win the approval of centrist Democrats uncomfortable with the concept. They have exposed a rift between liberal Democrats and the more business-friendly wing of their party.

The measure is a central plank of the Obama administration's strategy to right the housing market. Proponents say it will act like a cudgel that will encourage mortgage companies to voluntarily take advantage of government-backed financial incentives to modify loans.



Read more: http://online.wsj.com/article/SB123603052547013583.html

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This is the stick to go along with Obama's carrots in the Housing plan. For God's sake, Congress, don't f#$k it up.

Write a letter to your editors...
http://firedoglake.com/2009/03/02/action-tell-speaker-pelosi-to-stand-up-to-ellen-tauscher-and-the-bank-lobbyists-she-represents/

Sign the letter to Nancy Pelosi...
https://secure.firedoglake.com/page/petition/BankLobbyists

"Dear Speaker Pelosi:

I am outraged by the efforts of former Wall Street investment banker Ellen Tauscher and the New Democrat Coalition, who brag about their ability to "flex" and stop a bill to help the mortgage crisis that won't cost the taxpayer one red cent. Politico reports that you "buckled" to their efforts to help the banks and hurt their constituents.

Haven't we done enough for the banks, who want taxpayers to bail them out instead? Will they ever take responsibility for bad loans they should never have made? Tauscher and the New Democrats are not moderates, they are corporatists in the pocket of the banking lobby. Their Executive Director, Adam Pase, is a former banking lobbyist who worked on behalf of predatory lenders to remove regulation of sub-prime loans. Their "moderation" helped create the crisis in the first place.

Credit Suisse says that giving bankruptcy judges the ability to write down mortgages for people who are already in bankruptcy can stop 20% of foreclosures. Each foreclosure is estimated to reduce the value of the surrounding homes by 1%. President Obama and leading economists say that stopping the downward spiral of the foreclosure crisis, where more and more people are left owing more money on their homes than they are worth, is critical to reversing our economic downturn.

If Congress hadn't backed down to the efforts of these "moderates" to stop bankruptcy judges from writing down mortgages in 2007, much of our current crisis could have been averted. We know who these people are working for, and it isn't us.

More than ever, America needs principled and courageous leadership, and you are uniquely situated to provide it. Please start doing so by standing up to the bank lobbyists and the members of Congress they own, like Ellen Tauscher and the New Democrat Coalition. "

http://www.huffingtonpost.com/jane-hamsher/mortgage-write-downs-why_b_170773.html

Tauscher's office also said she hasn't met with any bankers or lobbyists on the matter, and that may well be true. She doesn't have to. Adam Pase, the executive director of the New Democrat Coalition which Tauscher chairs, works directly out of her office.

Pase is is a former lobbyist for the Twenty First Century Group, whose client, the Coalition for Fair & Affordable Lending, is an astroturf group, financed by the banking industry, that lobbied on behalf of. . . you guessed it. . . sub-prime lenders. Contrary to what you might hear on Morning Joe, it was national civil rights leaders who joined together to fight the Coalition's predatory lenders as they tried to pass the Ney-Kanjorski bill, which would have enabled banks to get around predatory lending laws and make more bad loans. This they justified based on the oh-so-high-minded need to provide loans to low income and minority borrowers. It was true scumbaggery.

Pase was also the senior policy adviser for Dennis Moore when Moore organized Blue Dogs to oppose mortgage write-downs on behalf of the banking industry in 2007, and he is evidently the one driving policy on this one for the New Dems. But one has to wonder -- what is Tauscher thinking? Her district is one of the hardest hit by the mortgage crisis, as you can see from the map. Why is she trying to limit mortgage write-downs to subprime loans only, on behalf of banks, when every foreclosure brings down the value of all houses in a neighborhood? Her claim to care so very much about people still struggling to pay their mortgages rings hollow.

Credit Suisse says that this bill would cut the rate of foreclosure by 20% and it wouldn't cost the taxpayers a dime. Why? Because it would force banks to write down the value of the loans on their books to their true value -- which would quickly show that they are probably insolvent. They're also hoping that the taxpayer will pick up the tab and they'll be able to escape taking responsibility for their own bad business decisions. Taushcer's own bill would provide mortgage relief from TARP funds.

I'd love for someone to explain to me the legal test for a "last resort only after voluntary mortgage modifications fail," and which paperwork will be needed to evidence same? Does Congress even contemplate how the laws they pass will be implemented? :eyes: