| Use TARP Funds Immediately to Address Foreclosures |
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FOR IMMEDIATE RELEASE Contact: Jesse Van Tol (202) 464-2709 Use TARP Funds Immediately to Address Foreclosures
First $350 billion misdirected, HELP Now and Eminent Domain are the solutions
WASHINGTON, D.C. – In testimony before the United States House of Representatives Committee on Financial Services, the National Community Reinvestment Coalition (NCRC) today proposed that remaining Troubled Assets Relief Program (TARP) funds be used to establish a national loan modification program to purchase 3-5 million home loans using the power of eminent domain. Arresting the foreclosure crisis, which is the root cause of the current financial crisis, and its contagion effects will begin the process of repairing the economy and stabilizing the turbulent financial markets. “To date, TARP has been used in an ineffective and misguided way,” said John Taylor, president and CEO of NCRC. “By failing to directly address home foreclosures, the program has missed the mark. While helpful, federal programs and voluntary efforts to stem the foreclosure crisis have not been sufficient. Now, facing a secondary wave of foreclosures caused by option-ARM loans and rising unemployment, a new strategy is desperately needed to stop the foreclosure crisis and repair the economy.” Under the proposed Homeowners Emergency Loan Program (HELP Now), the Treasury Department would be directed to purchase home loans at a steep discount (30%-35% of the current market value), effectively enabling their loan modifications to ensure long-term sustainability for struggling homeowners. HELP Now would include reductions to principal loan balances, which are necessary to address the scale of the crisis. The current economic crisis justifies the government’s use of eminent domain laws for a compelling public purpose, and would overcome noted legal barriers to loan modification. Through compulsory purchases of troubled loans, reluctant servicers, investors and lenders would not need to be persuaded to participate. Utilizing the federal government’s power of eminent domain avoids lawsuits from disgruntled investors. As Harvard Law Professor Howell Jackson points out, eminent domain can solve the barriers related to first and second liens by directly purchasing all mortgages on targeted properties. Stemming the foreclosure crisis is increasingly critical to restoring the health of the national economy. A few months ago, Moody’s economy.com predicted an additional 5.2 million foreclosures through 2010. Since then, studies by Credit Suisse and Moody’s economy.com predict as many as 8-10 million additional foreclosures as unemployment increases. Additional interventions are now necessary to address the contagion effects from the foreclosure crisis and to close the door to future crises of a similar magnitude. In its testimony, NCRC called for a range of interventions to address rising unemployment, enhance accountability in the loan modification process and prohibit abusive and irresponsible lending practices. A detailed description of HELP Now and NCRC’s full written testimony can be found at www.ncrc.org.
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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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