Congress has shown little interest in ensuring the new guarantee prices reflect fundamentals, making it likely many of the people "helped" under the program will end up facing foreclosure a second time. However, to make matters worse, they came up with the idea of financing the plan by taking away a stream of funding that had been dedicated to help low-income renters.
That's right; Congress wants to take away money from low-income renters to help bankers that made bad loans in the housing bubble. As we all know, when the banks are in trouble, it is not the time to talk about the free market.
The real painful part of this story is it would be very easy to help the real victims in this story: the low- and moderate-income homeowners, who were suckered into buying homes at bubble-inflated prices with bad mortgages. Congress could just temporarily change the rules on foreclosure to allow moderate-income homeowners facing foreclosure the option to stay in their home paying the fair market rent.
This would provide these families with housing security. At least as important, it is likely to result in many of these families remaining in their houses as homeowners, since banks will have a strong incentive to negotiate new terms on mortgages in order to avoid becoming landlords. And the best part of this story is that families would benefit from this change the moment Congress passed the law. There is no need for a new bureaucracy or any taxpayer dollars.
That is what Congress would do if it was serious about helping families facing foreclosure. Unfortunately, the banks seem to rank higher in its concerns - remember, just three years ago, it made the bankruptcy laws more stringent (applied retroactively), to boost bank profits.
Apparently, the banks rank so high Congress is even prepared to take money away from low-income renters to meet their needs. Stealing candy from babies would be a step up for this crew.
Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR).
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