Homeowners Come Up Empty in Bailout - Refinancing Falls by the Wayside

For people facing foreclosure — and for the housing and community development groups trying to help them — there’s been little to cheer about lately.

The $700-billion bailout bill approved last week offers little or nothing to homeowners in trouble. A measure to change federal law to allow bankruptcy judges to modify mortgage loans didn’t make it in the final version. Nor did a proposal to set aside for affordable housing some 20 percent of future profits from the sale of toxic mortgage-backed securities. (Republicans feared the money would go to ACORN, a community group the GOP links to voter fraud.)

As foreclosures mount, the bill’s provision calling for more loan modifications will have only a modest effect, considering that subprime mortgages have been sliced into pieces and sold to investors around the globe. Add to the insult, the debate over the bill reignited old charges that the Community Reinvestment Act, an anti-redlining law, caused the mortgage crisis, and that poor and minority borrowers are to blame.

It doesn’t get any better from there. The credit crisis is likely to make it even tougher, if not impossible, for homeowners to refinance their loans — even those who aren’t already underwater on their mortgages.

With all that government money dedicated to the bailout, meanwhile, there won’t be much left over to put toward rebuilding neighborhoods or creating affordable rentals. Cities and towns that used revenues from real-estate transactions to fund housing development won’t have that kind of money to spend anymore, given the collapse of the housing market.

Amid the rubble, some supporters are trying to remain hopeful that things will get better; that government and housing counseling groups might find creative ways to come up with solutions to modifying loans or reusing foreclosed properties. That’s for later. For now, there’s just the shell-shocked feeling that comes with facing an uphill battle that just got a lot steeper.

“The landscape looks like the Roman Empire after being attacked by Attila the Hun,” said Alan Mallach, a senior fellow at the National Housing Institute and former visiting scholar at the Federal Reserve of Philadelphia, referring to the outlook for helping homeowners and rebuilding neighborhoods. “It’s really bad out there.”

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Washington Independent: http://washingtonindependent.com/11304/kane-story

I bet you a lot of them did.

Shocked!

The usual class warfare