Our guest blogger is Ed Paisley, Vice President for Editorial at the Center for American Progress.
The Bush Administration and its conservative allies in Congress, including presumptive presidential nominee John McCain (R-AZ), continue to insist that the best way to resolve the ever-worsening U.S. housing crisis is for homeowners at risk of foreclosure to negotiate individually with their mortgage service companies for financial relief. A new report by the State Foreclosure Working Group, which includes bank regulators and attorneys general from 11 states, details why this approach simply doesn’t work.
The problem faced by the mortgage servicers is this: the number of delinquent mortgage loans is on the rise even as more homeowners already facing foreclosure attempt to renegotiate the terms of their loans. The Bush Administration’s failed effort to get mortgage lenders, servicers and investors to voluntarily renegotiate borrowing terms with individual lenders — known as the Hope Now Alliance — was evident even before this most recent report, given the rising number of delinquencies over the past year.
Now, those government officials closest to the crisis at at the state level have detailed exactly why individual and voluntary negotiations between at-risk borrowers and mortgage servicers is clearly not working. As New York Superintendent of Banks Richard Neiman explained to The Wall Street Journal, mortgage servicers need to treat borrowers in bulk “in order to move the process in a more efficient manner.”
A new, more forceful approach, is needed now. The Center for American Progress Action Fund and some of its allies on housing issues support two proposals now before Congress to help troubled homeowners refinance mortgages in bulk, and to help communities hit especially hard by foreclosures cope with the consequences. The Federal government needs these tools to stem the U.S. housing crisis and help the faltering U.S. economy.