Also Read: McCain Housing Plan - Obama Housing Plan
Each of the three possible candidates for nomination as their party's presidential nominee has made major speeches recently spotlighting their solutions to the housing and subprime mortgage crisis.
The three, Senator Hilary Clinton, Senator John McCain, and Senator Barack Obama differed in their approaches and the level of detail in their proposals.
We will continue our 3 part series with Senator Hilary Clinton who has outlined a four step plan to address foreclosures and their impact on individual homeowners, communities, and state and local government.
Step One: Passage of the proposed legislation by Rep. Barney Frank and Senator Christopher Dodd which would expand the government's capacity to stand behind mortgages that have been reworked on affordable terms.
Sen. Clinton called the current administration's efforts to help families a process that is both too slow and will help relatively few families; "it simply isn't enough to revive our housing market."
The Frank/Dodd legislation, she said, would move beyond this incremental approach by setting up an auction system for mortgage companies that would allow them to sell mortgages in bulk to banks and other buyers who would then restructure them to make them affordable for families. The auction system would be based on the fact that mortgages would be eligible to be guaranteed by the government once they are refinanced.
Saying that, given the depth and severity of today's housing crisis, simply facilitating the auction process might not be enough to get the economy moving again, the Federal Housing Administration should also stand ready to be a temporary buyer to purchase, restructure, and resell mortgages that are "underwater."
Step Two: Senator Clinton called on President Bush to appoint an Emergency Working Group on Foreclosures composed of distinguished, non-partisan economic leaders ' she specifically mentioned former Treasury Secretary Robert Rubin and former Federal Reserve Chairmen Paul Volcker and Alan Greenspan as examples. This group would report to Congress in no more than three weeks after its formation as to the sufficiency of the Dodd/Frank plan and how the FHA, other government agencies, and the government sponsored enterprises could best be utilized.
As part of step two she called again for a moratorium on foreclosures ' 90 days was the period she suggested when she first made this proposal in December.
Step Three: Senator Clinton proposed a new housing stimulus package to provide $30 billion directly to states and localities hard hit by the housing and subprime crises.
The money could be used to purchase distressed properties which cities and states could then convert to affordable rental housing or resell to low-income families. The money could also be used in neighborhoods with high foreclosure rates to avoid increased crime and blight, and to provide counseling and refinancing to help homeowners avoid foreclosure in the first place.
"If the Fed can extend $30 billion to help Bear Stearns address their financial crisis, the federal government should provide at least that much emergency assistance to help families and communities address theirs."
Step Four: This step would involve passing new legislation to clarify legal liability for mortgage companies that act to help more borrowers stay in their homes.
The Senator said that, at present, many mortgage companies are reluctant to restructure mortgages because they are afraid of being sued by the investment banks, private equity firms, and others who actually own the mortgages. She plans to introduce legislation this session to provide mortgage companies with protection against these types of lawsuits.
We will take a look at Senator Obama's proposal next.
Also Read: McCain Housing Plan - Obama Housing Plan