I’ve been talking a lot about steps the President can take to boost the economy that don’t require Congressional approval, and clearly the biggest option is aiding troubled borrowers. There’s still $40 billion in the practically-defunct HAMP program, which is only producing a handful of new applicants per month at this point. Fannie and Freddie are wards of the state and control a shockingly large amount of the nation’s mortgages. Firms like Bank of America are starting to get desperate to remove their liability for foreclosure fraud and may pay more handsomely to do it.
The time has come to quantify this fix. The New Bottom Line, a faith and community-based coalition of anti-Wall Street activists, has done the work. They find in a new report that solving the housing crisis would create one million jobs per year by putting $71 billion back into the economy.
“Homeowners across the nation are struggling to pay their boom-era mortgages with their recession-era salaries and the economy is suffering for it. Writing down the principals and interest rates on all underwater mortgages to market value would serve as the second stimulus that America so desperately needs, only without added costs to taxpayers,” according to the report entitled “The Win/Win Solution: How Fixing the Housing Crisis Will Create One Million Jobs.”
One in five Americans owe more on their mortgage than their home is actually worth. Collectively, underwater homeowners will have to pay down $709 billion in principal before they can start building equity in their homes. Every effort to reboot the housing market to date has failed because it has not done the most essential thing: reduce the massive debt load carried by underwater homeowners.
If the banks fix what they broke and wrote down principals on all underwater mortgages to current market value, it would inject a direct cash stimulus into the economy, redirecting billions of dollars that cash-strapped homeowners are currently paying on inflated mortgage debt toward other job-creating sectors of the economy. The plan would lower homeowners’ mortgage payments by an average of more than $500 per month or $6,500 per year.
The report can be found here. It’s not a report that looks at the political viability of a solution, it’s a report that points to the solution, and says what it would do. I think you could build a constituency around a deal that creates 1 million jobs and holds banks accountable for massive fraud, but that’s just me. The argument is basically that banks were rewarded with trillions of dollars of support after the financial crisis and that they have a responsibility to pay some of it back to help homeowners. This would create a virtuous circle, as the savings from principal reductions would flow into the economy, increase consumer spending and create jobs.
The New Bottom Line also included a nice state-by-state visualization of the impact of their proposal.
$500 a month is basically what a HAMP modification promises. So it’s not really an outrageous number, or a way to give people “free homes.” It’s helping out people who were ripped off or through no fault of their own bought mortgages at the wrong time from the wrong people. And remember, there practically is no legitimate mortgage market, given all the shenanigans in securitization from the banks. This should be the bare minimum fix just to make the system legal again.
Skeptics would say that there’s no way this can happen. But this serves as a template for an Administration clearly searching for off-the-shelf ideas to kick start housing. There’s only one way to fix the housing market, and that’s to fix the housing market. We’ve already tried the “jobs plans” that serve the rich and hurt the poor. This would be the other way around.
Actual Report From New Bottom Line:
Fixing the Housing Crisis Would Create One Million Jobs Annually, New Report Finds
Posted by Tracy Van Slyke 34pc on August 17, 2011 · Flag
For immediate release: August 17, 2011
Contact: Margot Friedman at 202-332-5550 or mfriedman@dupontcirclecommunications.com
www.newbottomline.com twitter: @NBLcampaign
Fixing the Housing Crisis Would Create One Million Jobs Annually, New Report Finds
Homeowners, Clergy, Unions & Others Call on State Attorneys General to Demand Principal Reduction for Underwater Homeowners as Part of Settlement with Banks
(Washington, D.C.) By writing down all underwater mortgages to market value, the nation’s banks could pump $71 billion per year into the economy, create more than one million jobs annually, save families $6,500 per year on mortgage payments, and fix the housing crisis once and for all, according to a new report by The New Bottom Line, a nationwide campaign representing 1,000 faith-based and community organizations that seeks to hold Wall Street accountable and find solutions for struggling and middle-class families.
Grassroots organizations across the country aligned with The New Bottom Line campaign are calling on State Attorneys General who are investigating the banks for foreclosure fraud to stand firm for a settlement agreement that (1) includes large-scale principle reduction for underwater borrowers; and (2) does not to release the banks from claims beyond the robo-signing scandal. This would provide real restitution for homeowners and allow states to sue the banks for wrongdoing connected to the origination of mortgages and the steps leading up to foreclosure.
“Homeowners across the nation are struggling to pay their boom-era mortgages with their recession-era salaries and the economy is suffering for it. Writing down the principals and interest rates on all underwater mortgages to market value would serve as the second stimulus that America so desperately needs, only without added costs to taxpayers,” according to the report entitled “The Win/Win Solution: How Fixing the Housing Crisis Will Create One Million Jobs.”
One in five Americans owe more on their mortgage than their home is actually worth. Collectively, underwater homeowners will have to pay down $709 billion in principal before they can start building equity in their homes. Every effort to reboot the housing market to date has failed because it has not done the most essential thing: reduce the massive debt load carried by underwater homeowners.
If the banks fix what they broke and wrote down principals on all underwater mortgages to current market value, it would inject a direct cash stimulus into the economy, redirecting billions of dollars that cash-strapped homeowners are currently paying on inflated mortgage debt toward other job-creating sectors of the economy. The plan would lower homeowners’ mortgage payments by an average of more than $500 per month or $6,500 per year.
Six billion dollars per month that is currently going to mortgage payments would instead go toward buying groceries, school supplies, and other household necessities. As consumer demand picked up, businesses would start hiring again. The report estimates that putting $71 billion into American consumers’ pockets annually would help create more than one million jobs per year.
The report includes a state-by-state breakdown of how much underwater homeowners would save per month, the amount the proposal would pump into the local economy, and numbers of jobs created. For example, the plan would inject an annual stimulus of $20.5 billion in California and 300,000 jobs per year; $1.64 billion in Ohio and 24,000 jobs; and $12 billion in Florida and almost 180,000 jobs.
The report notes that the banks can afford to execute this plan. Last year, the nation’s top six banks paid out more than twice the cost of the plan ($71billion per year) in bonuses and compensation alone ($146 billion in 2010). Currently, the nation’s banks are sitting on a historically high level of cash reserves of $1.64 trillion.
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The New Bottom Line is a new and growing movement fueled by a coalition of community organizations, congregations, labor unions, and individuals working together to challenge established big bank interests on behalf of struggling and middle-class communities. Together, we are working to restructure Wall Street to help American families build wealth, close the country’s growing income gap and advance a vision for how our economy can better serve the many rather than the few. Coalition members include PICO National Network, National People’s Action (NPA), Alliance for a Just Society, Alliance of Californians for Community Empowerment (ACCE), Industrial Areas Foundation of the Southeast (IAF-SE) and dozens of state and local organizations from around the country. Learn more at www.newbottomline.com
http://www.scribd.com/doc/64112283/New-Bottom-Line-Report
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