Senate Bill Still Doesn't Address the Root of the Problem
Thanks to all of you who responded to our call last week to contact your Representatives and Senators about the $700 billion bailout bill. We wish we had better news, but so far Congress has declined to consider meaningful action to stop foreclosures—not even the tax-free option of allowing loan modifications through the court system.
The current bailout proposal—including the one the Senate will vote on later today—will not stop the decline in home prices that drags down the entire economy. This bill is a boon to Wall Street, but does virtually nothing to help millions of middle-class families facing foreclosure. We need a truly comprehensive solution to the economic crisis.
Any real solution must include a specific, workable plan for stopping foreclosures.
The current proposal includes a vague provision that calls for the government to buy mortgages and securities and then try to modify them. However, this would have very limited impact, since Wall Street splintered home loans into complex securities, making it very difficult for the government to take any effective action on the resulting scattered pieces of mortgages.
A continuing foreclosure epidemic will hurt everyone.
CRL estimates that subprime foreclosures will cause 40 million homes that happen to be located nearby to lose as much as $352 billion in property values over the next few years.
For more details, see CRL's recent update on the impact of subprime foreclosures and their impact on home values at http://www.responsiblelending.org/issues/mortgage/research/updated-projections-of-subprime-foreclosures-in-the-united-states-and-their-impact-on-home-values-and-communities.html.
The situation is evolving on Capitol Hill, and as we send this, no one is certain of the outcome. We will keep you up to date as events unfold. Meanwhile, we would like to hear from you. Comment on the bailout situation.
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