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Clinton Proposes Foreclosure Plan and Tax Cuts

Amid the growing foreclosure crisis, Hillary Clinton today proposed a plan to address problem threatening Wall Street with more regulation if swift action is not taken to ease the crisis on the American people.

She proposed a three-step plan, which included a freeze on the subprime rate for owner-occupiers and a tax cut for the middle class to help afford Healthcare, Child care and college.

The Three-Point Plan

1. Observe a foreclosure moratorium of at least 90 days on subprime, owner-occupied homes. The moratorium will stop foreclosures until lenders and servicers have an opportunity to implement the freeze in mortgage rates. The moratorium will also give state and city organizations as well as community groups the necessary time to provide financial counseling to at-risk homeowners.

2. Freeze the monthly rate on subprime adjustable rate mortgages, with the freeze lasting at least 5 years or until the mortgages have been converted into affordable, fixed-rate loans. After the moratorium, there should be a long freeze in rates on adjustable rate mortgages. The overwhelming majority of subprime mortgages have adjustable rates. The long rate freeze will give the housing market time to stabilize. It will give families an opportunity to rebuild equity in their homes. It also gives the mortgage industry time, and incentive, to convert mortgages that were designed to fail into loans that are actually affordable. The rate freeze and loan modification must be extended not only to borrowers who are current but to some who have fallen behind. After all, it is indisputable that brokers and mortgage companies lured families into mortgages that were designed to end in foreclosure. This was only possible because regulators were asleep at the switch. A rate freeze is critical. An average of $30 billion in loans will reset monthly next year. One study indicates that the average reset increases monthly payments by 40%. It is no surprise that rate-resets are the major driver of the foreclosure crisis.

3. Provide status reports on the number of mortgages being modified. Resolution of the foreclosure crisis will require that large numbers of unworkable mortgages be converted to stable loans. To date, however, despite pressure from Congress and the press, lenders and servicers have modified only about 1% of subprime mortgages. This obviously has to change. We cannot take the industry at its words that it will follow through on an agreement to convert loans expeditiously. Accordingly, the agreement must impose on lenders and servicers an obligation to regularly report their loan modifications.

First word is the industry will not support a foreclosure moratorium, according to Kurt Pfotenhauer, senior vice president for government affairs with the Mortgage Bankers Association.

Hillary Clinton was the first candidate to put out a specific proposal leaving other candidates to scramble to put together a plan of their own.

On the tax cuts:

To help families cope with growing economic challenges, Clinton would provide a package of middle class tax cuts, including generous new support to make college, health care and retirement more affordable. She would also implement fast-acting, short-term stimulus measures, including a Community Support Fund of up to $5 billion to help hard-hit communities and distressed homeowners endure the foreclosure crisis, and a $2 billion emergency investment in energy assistance for families in cold weather states.

Clinton’s announcement comes ahead of Bush’s foreclosure plan, which he will headline on Thursday. Kurt Pfotenhauer says Clinton will likely get most of what she asks for with Bush’s plan.

Categories: Democrats, Hillary ClintonPosted on: 5th December 2007 by: admin
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