Horray! Henry Paulson, Treasury Secretary, formerly of Goldman Sachs, put his foot down in the tender part of the financial services sector and passed laws requiring mortgage lenders to modify the mortgages of desperate homeowners facing foreclosure.
I'm kidding. I jest. Yesterday he and Bush announced the creation of something called "Project Lifeline" that will "help" borrowers who are more than 90 days delinquent with mortgage payments. When I say help I mean holding out a twig to a drowning person then blaming them when the twig snaps. As in today's Wall Street Journal's article, Earlier Subprime Rescue Falters, describes the rescue effort:
The companies [Bank of America, J.P. Morgan & Chase Co., Citigroup Inc., Countrywide Financial Corp., Washington Mutual and Wells Fargo & Co.] say they will send letters to homeowners alerting them that if they make a call to their loan servicer and provide financial information, they might get a 30-day halt in foreclosure proceedings and a chance to negotiate friendlier mortgage terms.
Paulson and the six companies above mentioned cooked up this ineffectual plan. The companies represent about 50% of all mortgages held in the U.S.
Back in December Paulson came up with another brilliant plan devised to fail: a hotline (1-888-995-HOPE--when Bush announced its creation on TV he gave out the wrong number). Since then the hotline has received about 180,000 calls of which counselors hav recommended help for about 10,000.
These are all recommendations, suggestions, whispers into the ears of the CEOs. Nothing is mandatory. Everyone is twisting in the wind.
The hotline is backed by the Homeownership Preservation Foundation. Some spokesperson stated that it doesn't advocate for the homeowner, it's merely trying to facilitate a conversation between lenders and borrowers.
Well, I could give you a quarter and that'll facilitate the conversation better. Perhaps the non-profit foundation has a conflict of interest:
The foundation was created in 2003 with $20 million in seed money from GMAC ResCap, a unit of GMAC LLC that services 3.4 million mortgages and until recently made subprime loans. Ms. Hernandez (their spokesmodel) says the foundation's ties to the mortgage industry don't influence the services it provides borrowers. "The center of our life is what is good for homeowner," she says.
I don't know who's fooled by this bull---. Certainly not the homeowners, or economists, or state officials:
Hope hotline counselors typically don't suggest specific actions to a loan servicer, such as an interest rate freeze or a repayment plan. However, says Brenda Grauer, housing policy adviser to the Illinois attorney general, "We've found the most effective approach is to actually come up with a concrete proposal that will work for the particular borrower."
Support Barney Frank's effort to change bankruptcy laws to include mortgages! We need mandatory intervention, not whispers into the ears of bank CEOs. They destroyed the credit system in the first place with their worthless structured vehicles. And they knew they were worthless. They called them "toxic waste."