Consumer Law

Criticism of Bush Administration Plans for Addressing the Subprime Mortgage Crisis

By Jeff Sovern

The Times editorial page continues to monitor proposals for addressing the subprime mortgage meltdown.  The most recent editorial, "Lifeline for Whom?," appeared yesterday.  Here's an excerpt:

In May last year, Senator Christopher Dodd, chairman of the Senate Banking Committee, convened a group of major banks and loan servicers that promised to ?create a permanent solution,? wherever possible, for troubled subprime borrowers. Then there was Hope Now, created last October and, now, as of Tuesday, Project Lifeline, both created at the urging of the Bush administration and both involving mortgage industry honchos promising to help hard-pressed borrowers.

If the industry had kept the promises they made last May, the other two efforts might not have been needed. So it?s unclear why the administration continues to believe that urging the industry to do more is the most effective way to cope with the foreclosure crisis. The industry, for its part, has earned the skepticism that has greeted its serial promises.

The Business section also included an article about Project Lifeline.  Headlined "Plan to Aid Borrowers is Greeted by Criticism," the article included the following:

?These policies make nice politics because it says our politicians care about us and don?t want the impersonal market forces to hurt the innocent,? said Marc Chandler, the top currency strategist for Brown Brothers Harriman. ?They don?t seem to address the real underlying cause of the angst in the market.?

And Senator Charles E. Schumer, chairman of the Joint Economic Committee in Congress, said in a statement that the plan failed to offer enough help.

?It is encouraging that lenders and servicers are willing to temporarily pause foreclosures, but only meaningful and long-term loan modifications will help keep people in their homes,? Mr. Schumer, Democrat of New York, said.

And here's a link to an article from December 30 in which local officials complained that they were not included in the Hope Now program:

[B]anking regulators in New York, New Jersey and Connecticut said the alliance was missing some important pieces: namely, them. The lack of a coordinated local response, they said, could hinder the financial recovery of thousands of struggling homeowners.

''Ignoring the complexities, differences and commonalities of state laws and regulations is a big miss for the Hope Now alliance,'' said Richard H. Neiman, New York's superintendent of banks. The omission, he added, ''exposes the alliance to proposing unrealistic plans without consideration for the complete picture.''

I should note that for all I know, local regulators have since become involved.

Full post as published by CL&P Blog on February 14, 2008 (boomark / email).