[Announce] Treasury's Plan Won't Do Enough to Address Foreclosure Crisis

[COMM-ORG announcements]

From: "Tim Lilienthal, PICO National Network" <tlilienthal at piconetwork.org>


FOR IMMEDIATE RELEASE
November 11, 2008
Contact: Tim Lilienthal, PICO, 413-537-0631

Treasury's Plan Won't Do Enough to Address Foreclosure Crisis

Washington, D.C. - PICO released the following statement today.

This morning, officials from the Treasury Department and Federal
Housing Administration announced that Fannie Mae and Freddie Mac
will be instituting a new streamlined loan modification program
to help struggling homeowners.

Treasury officials say that the program, which will be aimed at
homeowners who are 90 or more days delinquent and who have high
loan-to-income ratios, will work to reduce monthly payments to
38 percent of income by reducing interest-rates and extending
loan terms to up to 40 years. FDIC Chairwoman Sheila Bair, a
vocal proponent of systematic loan modification, said in an
email statement that the program does not do enough. "This is a
step in the right direction but falls short of what is needed to
achieve wide-scale modifications of distressed mortgages," said
Bair.

While this plan is a step in the right direction, there are
several aspects that will limit its impact. Most notably,
according to the New York Times, the plan may only apply to
so-called "conforming mortgages" that Fannie and Freddie have
guaranteed, while leaving out the bulk of subprime loans that
are at the heart of the foreclosure crisis.

The plan does not include money from the Treasury's $700
billion bank bailout and is not mandatory for companies that
receive taxpayer money. In addition, to qualify for the program,
borrowers would be required to provide evidence that they
suffered a hardship that has made it impossible for them to stay
current, which would eliminate millions of homeowner who have
not suffered a hardship but are still struggling to make their
payments.

Last month, PICO launched a nationwide campaign to press the
federal government and banks to adopt broad-based, systematic
loan modification protocols similar to what the FDIC has done in
its takeover of IndyMac Bank.

Specifically, PICO is calling on the Treasury Department to:

1. Require that banks that receive tax payer investments adopt
broad-based loan modification protocols that set monthly
payments at 34 percent of income, where necessary reduce
principal to reflect current property values, and ensure that
modified loans are sustainable over the life of the loan.
Broad-based loan modification should apply to sub-prime, option
ARM and other Alt-A mortgage loans.
2. Use the powers granted by the bailout legislation to fully
guarantee loans that are modified, in order to create an
economic incentive for investors to agree to new loan terms.
3. Apply the same systematic loan modification protocols to
troubled loans purchased as part of the bailout program.

On November 17-18, 200 PICO clergy and congregation members will
travel to Washington, D.C. to meet with Treasury and FDIC
officials and House Financial Services Chair Barney Frank to
press for broad-based loan modification that could save as many
as one million families from foreclosure.

For more information on PICO's National Campaign to Stop
Preventable Foreclosures, visit
www.piconetwork.org/national-campaign-to-stop-foreclosures.html
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