February 27, 2008
White House Stands Up For Contracts
According to CNN, the White House has issued a warning to Democrats that President Bush will veto a pending bill that would create a $4 billion fund to help state and local government buy homes abandoned in the mortgage crisis. According to a White House statement, passing the bill "would constitute a bailout for lenders and speculators, while doing little to help struggling homeowners."
Actually, the bill proposes to help struggling homeowners by giving bankruptcy judges the power to modify loan terms. According to the Washington Post, the White House finds this proposal unacceptable because it "would undermine existing contracts." So there you have it -- the Bush administration stands up for contracts, even in bankruptcy proceedings.
But the Bush administration also has an alternative proposal, a private-sector alliance called HOPE NOW (see logo at left). According to this White House press release, this alliance "is implementing a plan that could help up to 1.2 million subprime homeowners avoid foreclosure over the next two years." However, as the New York Times points out, HOPE NOW is a voluntary program and thus may only affect a tiny fraction of the 1.8 million borrowers facing steep increases in their sub-prime loan rates. So, the key word in the sentence quoted above is "could," and HOPE NOW may actually mean that all borrowers can do right NOW is HOPE. Meanwhile, as reported on the Consumer Law & Policy Blog, Fitch Ratings projects that 50% of the subprime mortgages from the fourth quarter of 2006 will end in foreclosure.
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