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"The Washington Current" - 2 new articles

  1. Attorneys Question Rental Proposal: Why Isn't Administration More Interested In Preventing Foreclosure In 1st Place?
  2. Capitol Idea: Stimulus is Not a Four Letter Word
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Attorneys Question Rental Proposal: Why Isn't Administration More Interested In Preventing Foreclosure In 1st Place?

While the Obama administration has begun looking at ways to transform government-owned foreclosed homes around the country into rental properties, a group of lawyers wants the administration to do more to help keep embattled homeowners in their homes in the first place.

The administration last week announced plans to convert some of the 250,000 foreclosed homes that the government owns through Fannie Mae and Freddie Mac and the Federal Housing Administration in an effort to improve the nation's housing market. The government would look for investors to turn foreclosed homes into rental units.

However, the head of the National Association of Consumer Bankruptcy Attorneys (NACBA) wants to see the government offer more help to those Americans facing mortgage trouble so as prevent more foreclosures.

"While there is value in cleaning up the abandoned and vacant foreclosed homes that are a blight on communities across the country, I question why the Administration isn't more concerned about avoiding preventable foreclosures in the first place. Otherwise, you are looking at a situation here of closing the barn door after you've let the cows escape," says NACBA President William Brewer. "When provided the opportunity to embrace a plan for judicial mortgage modification in the early years of the foreclosure crisis, the Administration instead relied on voluntary efforts of the servicers to modify mortgages. Their solution – HAMP – is a proven failure with serious nationwide consequences."

The administration's signature mortgage-prevention program, known as HAMP, has faced a long string of news stories indicating that it has not kept up with the needs of homeowners, and that mortgage companies have broken program rules.

More than 2.5 million homes were foreclosed on through 2009 and another 8 million are projected to be foreclosed on by the time the housing crisis abates, according to NACBA.

"So, now we have only a plan to clean up the wreckage inflicted by a bad policy decision that went against U.S. consumers exactly as many forecasted it would," Brewer adds.

NACBA urges the administration to take on the bigger challenge of finding ways of avoiding preventable foreclosures in the first place, rather than just cleaning up the mess after the fact.

"Toward that end, we have presented the Administration with one possible option, the so-called 'Principal Paydown Plan,' under which an undersecured mortgage would be restructured in a Chapter 13 bankruptcy so that the homeowner would immediately start paying down the loan principal and reduce negative equity by reducing the interest rate to zero percent for five years," Brewer says. "At the end of this five-year period, the remaining principal balance would be amortized over 25 years at the Freddie Mac survey rate. Leading housing economists have consistently cited the problem of negative home equity as a key factor pushing up the foreclosure numbers.

"Not every individual foreclosure can or should be stopped, but there is an urgent need to stem the crisis by closing the growing chasm between prevention and losses. Without stronger policy intervention, not only will millions of families lose their homes unnecessarily, but massive foreclosures will continue to destroy communities, drag down the housing market, and keep a full economic recovery out of reach," he adds. "It's time for the Obama Administration to stop focusing on disaster relief and instead put its energies into disaster prevention when it comes to the U.S. foreclosure crisis."

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Capitol Idea: Stimulus is Not a Four Letter Word

By Scott Nance

I’ll let you on a little secret about what goes on here in Washington and reveal how policy wonks in Washington really have fun. (And, no, since this is a family friendly column, we’ll leave the likes of Anthony Weiner and his ilk aside for the moment.)

The hot game inside the Beltway is for economists, journalists, and other assorted scribblers coming up with yet more proof that the 2009 economic stimulus plan actually worked. It’s like the egghead equivalent of tic-tac-toe around here. It really is. The Congressional Budget Office, as well as Moody’s chief economist Mark Zandi and Princeton economist Alan Blinder have all gotten their cracks at it.

And everyone here eventually gets his or her turn. The latest player is policy analyst Michael Linden, who has cleverly turned stimulus opponent Douglas Holtz-Eakin’s own methology against him to prove, yet again, that despite all the tea party bluster, the stimulus did indeed create millions of jobs and add growth to the American economy when it needed it the most.

The problem is that while all of this stimulus-proving has been great fun for us in the capital, few of us have been getting the rest of the country in on the game. That includes, most importantly, President Obama. Which is odd, because, he helped drive the stimulus in the first place. And when the president does sometimes dare mention his stimulus, as he did at a press conference last month, he lumps it in with the Bush tax cuts and paying for war, sounding like he kind of regrets it in a way.

That relative silence and timidity on the subject has allowed tea partyers, conservatives and other opponents to denigrate the stimulus either as a failure, “socialism,” or both. Allowing the stimulus to be mislabeled in this way now poses a great danger as the country now is teetering back on recession, and needs more, not less, stimulus.

The problem, as the nation knows, is rampant unemployment. We need to create jobs, lots of them. Lately, the president has been talking more about patent reform and new free-trade agreements as job-creators. While such measures may create jobs, they will come perhaps years down the road at a time when we need to put people to work today. The only way we can do that is more stimulus. Americans, by roughly a 2-to-1 margin, say unemployment as a problem is even bigger than the national deficit and debt.

Naysayers, of course, will say more stimulus is a lost cause. There’s no way the Republicans would let it pass Congress, they argue. As things stand, that’s probably true. That’s why President Obama has to climb aboard Air Force One and get onto his bus tours, and start hauling on stage with him some of those millions of ordinary Americans who have jobs today thanks to the stimulus plan, and let them tell their stories.

Particularly, the president has to parachute into the districts of all of the hypocritical Republicans who slam stimulus on the one hand, but put their hands out for its cash on the other. Republicans like Rep. Michele Bachmann, who criticizes the stimulus as an “orgy of spending” out on the campaign trail, but at the same time requests stimulus dollars to create 1,500 jobs for something called the Big Lake Rail Park in her Minnesota district .

Bachmann isn’t alone. Conservative Sen. Jeff Sessions of Alabama also wanted his turn at the stimulus, for cash to help an ethanol plant in his state, to create 750 jobs. And there are many others, too. President Obama needs to criss-cross the country, exposing these Republican frauds and liars, helping the citizens in their states and districts tell fellow Americans how the stimulus has helped. The president has to do this as long as it takes until voters not only are asking for new stimulus, but are demanding it.

Scott Nance has covered Congress and the federal government for more than a decade. Capitol Idea is his regular column from Washington. This article was first published as Stimulus is Not a Four Letter Word on Blogcritics.

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