Hypocritical Stand On Foreclosures

March 31st, 2008 | Tags: Foreclosure

It is happening too frequently. Government is hosting meetings with lenders and tall promises are made about helping foreclosure victims. But as soon as the hype is over it is back to square one – the lenders return to their work of foreclosing..

But the game show goes on. Senator John McCain called for another round of promises at a meeting on Tuesday. The essence of his talk was his stand against government action taken so far to help the house owners. His words will not even lighten the pressure leave along bring it to a close. This crisis is the worst the nation has seen since the Depression. At this point his jibes against the Republican nominee’s comment on the economy and the responsibility of the government to stand beside the people is in bad taste and unwelcome.

McCain suggested that federal aid might do more harm than good by helping those house owners who do not deserve aid. His tone appeared naïve and petty. It smacks of double standards when he has little to complain about the role of government in supporting bankers trying to prevent bankruptcy of Bear Stearns.

The language of the senator makes ambiguous the fact that the foreclosure victims did not walk into this soup by themselves. The lenders aided and abetted in peddling these complex unaffordable loans. At the root, McCain failed to grasp the basic thing that the foreclosure crisis has gone far beyond the stage of dividing the deserving from the undeserving. Today the vital issue at stake is the health of the national economy including the feasibility of the financial system itself.

The question then is not whether the government should directly intervene or not but when and how it will do so. Senator Hillary Clinton and Senator Barrack Obama understand this clearly. They have called on the Federal Housing Administration to play a larger decisive role in the game. Both Obama and Clinton have suggested that the law should be so amended that that the borrowers will be able modify the loans at reduced interest rates. The option would be there for reducing interest or lowering principal before thinking about bankruptcy. Clinton has also called for additional $30 billion federal as well as a 90 day hold on scheduled foreclosures together with a rate freeze on sub-prime ARM’s. The problem today is not so much the interest rate as the property being worth less than the loan amount.