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FOR IMMEDIATE RELEASE Contact: Jesse Van Tol (202) 464-2709
March 17, 2008 jvantol@ncrc.org
$230 Billion Approved for Bank Bailout;
$0 for Homeowners Facing Foreclosure
Major Actions to Avert Major Economic Crisis Continue to Avoid Central Problem of Foreclosure Crisis
Washington, DC, March 17 – Last week the Federal Reserve approved $230 billion in
financial assistance to banks, including a $30 billion loan directed to
investment bank Bear Stearns. Those are the first major actions to bail
out several large banks for irresponsible lending practices that have
predisposed millions of families to foreclosure, destabilized the US
economy and global markets, and now are exposing the Federal government
to billions of dollars worth of risky assets.
While quick action was taken to keep big banks afloat, millions of
homeowners have been allowed to continue to sink into foreclosure
without any meaningful assistance. Current interventions have relied
heavily on repayment plans and other minor modifications that do not
sustain homeownership, and largely push the problem into the future.
The underlying problem is massive foreclosures caused by deceptive loan
products to families. Helping families would directly contribute to
shoring up the housing markets, financial system, and economy. But
instead, banks are being bailed out and it will do nothing to shore up
the collapsing housing market.
“It’s frustrating to see working families ignored, while billions of
dollars begin to flow to bail out the institutions that caused the
problem,” said NCRC President & CEO John Taylor. “The
Administration is not concerned with the moral hazard of encouraging
financial institutions to pursue reckless and irresponsible behavior
that endangers the American taxpayer and economy,” said Taylor. “But
they are completely ready to punish working families using ‘moral
hazard’ as the excuse.”
The newly proposed rules proposed by the Federal Reserve Board to
address unfair and deceptive lending practices “acknowledges the
widespread existence of predatory lending,” said John Taylor, NCRC’s
President & CEO. “The fact is that millions of borrowers are facing
foreclosure because of outdated regulatory consumer protection that has
not kept pace with changes in the market,” stated Taylor.
But while tougher rules will protect against future irresponsible
lending practices, they do not address past abuses that have left
homeowners in unsustainable loans. Immediate intervention is needed to
ensure that mounting foreclosures do not drive the economy into a
sustained recession.
The National Community Reinvestment Coalition has proposed a major
initiative called the Homeowners Emergency Loan Program or HELP Now.
That program essentially purchases loans from securitized pools at a
steep discount and applies the discount to the outstanding loan amounts
allowing for substantial loan modifications or refinancing. The plan
uses federal funds as a recoverable advance.
“We need a plan that will immediately address the foreclosure problem
in this country today. It is wrecking not only our neighborhoods but
the entire economy. No American will be left untouched by this crisis,
” said John Taylor at NCRC’s annual conference last week.
The National Community Reinvestment Coalition is an association of more than 600 community-based organizations that promote access to basic banking services, including credit and savings, to create and sustain affordable housing, job development and vibrant communities for America's working families.
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