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This post is by Mark Winston Griffith, Senior Fellow of The Drum Major Institute for Public Policy.
If there is one thing that distressed homeowners need right now is smart, forward thinking legislation that can help slow down the wave of subprime mortgage inspired foreclosures, and establish strong anti-predatory lending measures.
Unfortunately, the Foreclosure Prevention Act of 2008 which the Senate is poised to vote on, is not the one. Commentators on both the ideological right and left have plenty to complain about. It's the kind of bipartisan, patchwork Frankenstein monster that only a politician's mother could love.
Let's be fair. It's not all bad. In fact there is alot about the bill that is promising. It includes much needed FHA modernization provisions, monies for foreclosure prevention and housing counseling, and Community Development Block Grants for state and local governments to purchase foreclosed properties and turn them into affordable housing.
But ultimately, in an effort to satisfy Senate conservatives, none of whom are particularly interested in helping out distressed homeowners, it's filled with unnecessary tax breaks and measures designed to serve the interests of homebuilders and, bizarrely enough, perhaps even speculators. Even the "enhanced" mortgage disclosures are a cruel joke for those hoping for full-scale, subprime mortgage era, anti-predatory lending provisions.
And of course, it wouldn't be a real piece of patriotic American legislation without a nod to veterans. Fine, but quite a few civilians could use the 9 month stay on foreclosure proceedings too.
Perhaps most conspicuously absent is the bankruptcy reform that many progressives were advocating for, which would have given bankruptcy judges the ability to make mortgages more affordable, the way they already do with other kinds of debt.
Is this the best that this senate could salvage given opposition to more meaningful proposals? Perhaps. Bush is announcing weak measures of his own which are designed to do an end-run around this bill.
Nonetheless, the Senate has missed a real opportunity to create a broad mechanism for modifying mortgages destined for disaster, or to put in place landmark public policy that could help prevent abusive lending practices. The most enduring legacy of this bill could be that it serves to preempt stronger congressional measures, like those introduced by Durbin and Dodd for example. To add insult to injury, it lends credence to critics of foreclosure prevention efforts who have been warning against bloated government bailouts.
Another classic example of government action. By aiming too widely, it misses the mark.
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