Yesterday (January 10, 2008), in Las Vegas, Hillary Clinton met with local residents and outlined her plan to tackle the housing foreclosure crisis. Nevada faces one of the highest foreclosure rates in the country and as president, Hillary Clinton will work to preserve the American dream of home ownership.   

 

America is experiencing a devastating housing crisis:

 

The foreclosure crisis is threatening our economy and the well-being of millions of middle-class Americans. The crisis is particularly acute in Nevada, the state with the highest foreclosure rate in the country.

 

At the end of September, there were approximately 12,000 homes in Nevada in foreclosure – a fourfold increase from the prior year. The foreclosure crisis is slowing job growth in the state, hurting local communities, and imposing costs on cities. It is estimated that each foreclosure in the Las Vegas area has a municipal cost of roughly $7,000. Foreclosures are also lowering home prices. Nationwide, home prices are down more than 6%, and in the Las Vegas area specifically, prices have fallen at least 10%. The fall in home prices has already cost America’s families an estimated $1.3 trillion, devastating their financial security.

 

 

Hillary Clinton is the only candidate with a comprehensive plan to address the foreclosure crisis:

 

Ø	A foreclosure moratorium of at least 90 days on subprime, owner-occupied homes
Ø	A freeze in the mortgage rate on subprime adjustable rate loans, with the freeze lasting at least 5 years or until the mortgages have been converted into mortgages families can afford
Ø	Status reports on the number of adjustable rate mortgages converted to stable, fixed-rate loans
Ø	A Community Support Fund of up to $5 billion to help families receive financial counseling and other services to avoid foreclosure, and to help hard-hit communities
Hillary has also announced plans to ensure that the mortgage crisis never recurs and to preserve the American dream of homeownership:
€  Improve underwriting standards for subprime mortgages   €  Require "plain-talk" disclosure so that borrowers better understand their mortgage terms   €  Crack down on unscrupulous mortgage brokers   €  Eliminate prepayment penalties that trap families in unworkable mortgages   €  Prosecute foreclosure-related fraud   €  Dramatically expand access to financial counseling   €  Empower state housing finance agencies to help families refinance unworkable mortgages   €  Enable Fannie Mae and Freddie Mac to do more to help responsible borrowers receive mortgages   €  Modernize the Federal Housing Administration so that it can provide an alternative to the subprime mortgage market

 

Hillary’s Plan to Address the Foreclosure Crisis:

 

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 contact at-risk homeowners and 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.

 

A freeze in the mortgage rate on subprime adjustable rate loans, with the freeze lasting at least 5 years or until the mortgages have been converted into loans families can afford.  After the moratorium, there must 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 some 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 every month this 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.

 

Status reports on the number of adjustable rate mortgages converted to stable, fixed-rate loans. Resolution of the foreclosure crisis will require that large numbers of unworkable mortgages be converted to stable loans. Last year, however, despite pressure from Congress and the press, lenders and servicers 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.

 

If Wall Street and the mortgage industry do not voluntarily agree to observe a foreclosure moratorium, freeze rates, and provide status reports, the crisis will build, our economy will suffer, and too many families will lose their most precious asset. We cannot allow this to happen. Accordingly, if Wall Street and the mortgage industry do not shoulder their responsibility, Hillary will consider legislation that offers protection to mortgage servicers and others who work with borrowers to modify their mortgages. Servicers and others who administer the mortgages can save families’ homes, save investors from losses down the road, and help the economy. However, many servicers are concerned about opening themselves to lawsuits from the investors who actually own the loans. Hillary is prepared to consider giving legal protection to servicers and others who administer mortgages when they do the right thing by balancing the interests of the homeowners, the investors, and our economy.

 

A Community Support Fund of up to $5 billion to help hard-hit communities and distressed homeowners weather the foreclosure crisis. Foreclosure prevention is more critical than ever. The concentration of foreclosures in particular neighborhoods has a negative ripple effect on communities, leading to higher rates of crime, lower tax revenues, and lower property values. Risky subprime loans are three times more likely in low-income neighborhoods than in high-income ones. Minority communities are also disproportionately at risk because subprime loans are often concentrated in minority neighborhoods. The Center for Responsible Lending estimates that 55% of African-Americans and 46% of Latinos who purchased homes in 2005 received subprime mortgages. And the foreclosure crisis is mostly a subprime crisis. Subprime mortgages constitute 20% of Nevada’s mortgages but 65% of the state’s foreclosures.

 

The Community Support Fund will help to finance initiatives by states, cities, and community groups to reduce foreclosures, and to help cities cope with the financial and social costs associated with an increase in vacant properties. The fund will provide a much-needed boost to communities already feeling the effects of the economic downturn. States are already piloting programs to stem foreclosures. Many of the programs provide financial counseling to at-risk homeowners, help borrowers work out solutions with lenders, and educate homeowners about predatory lending. Studies demonstrate that the overwhelming majority of families that receive financial counseling ultimately avoid foreclosures.