FOR IMMEDIATE RELEASE Contact: Jesse Van Tol (202) 464-2709
February 11, 2009 jvantol@ncrc.org
Millions of Mortgages in Jeopardy
Washington, DC – National Community Reinvestment Coalition (NCRC) president and CEO John Taylor met today with Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan, in a meeting attended by financial institutions, trade associations and non-profits. Taylor warned of the danger to the economy of rising foreclosures and urged the secretaries to act quickly to enact a broad-based loan modification program. Geithner’s announcement yesterday of Treasury’s Financial Stability Plan was met with disappointment by NCRC, as the plan delays by several more weeks addressing the rising tide of foreclosures.
“Fixing the economy and ending foreclosures go hand in hand. You can’t do one without the other. Foreclosures should be Treasury’s #1 priority, not something to be done when we get around to it. Within the next few weeks, we will see tens of thousands more homeowners go into foreclosure. Treasury must take control of these toxic loans at a discount and modify them so that people can stay in their homes,” said John Taylor.
“Massive foreclosures and their contagion effects formed the epicenter of the financial crisis. We need a plan that meaningfully reduces loan costs through interest rate cuts and principal loan reductions. The longer Treasury delays announcing substantive measures to bring financial stability to working families and communities, the longer the US financial system and overall economy will suffer,” said Taylor.
Rising foreclosures are spurring a self-enforcing cycle of defaults, declines in home values and rising unemployment. Widespread unemployment is accelerating the economic crisis, as evidenced in a recent report published by Credit Suisse. The study projects 9 million foreclosures over the next four years, assuming an 8% unemployment rate. Given the current unemployment rate of 7.6%, with nearly 600,000 jobs lost last month alone, it seems certain that the US is on track to see unemployment hit 8% very soon.
At his meeting with the secretaries, Taylor discussed the need for broad-scale loan modification through the Homeowners Emergency Loan Program (HELP Now). This program would allow the Treasury to exercise its authority to purchase troubled loans at steep discounts (equivalent to roughly the current market value) from securitized pools. This would result in a relatively low cost to taxpayers. The government would then arrange for these loans to be modified through existing entities such as Fannie Mae and Freddie Mac, and then sell the modified loans back to the private market.
A detailed description of NCRC’s HELP Now proposal can be found at www.ncrc.org.
