As we all know, the Senate screwed us over in the spring when they took the enforcement mechanism, cramdown, out of Obama's carrot-and-stick plan for stopping foreclosures. Not surprisingly, the plans signed into law without cramdown isn't working. The big bailed-out banks are still taking homes away from people who would have been able to afford them if the bankers had wrecked the economy, and record numbers of families are going homeless.
I have an idea for helping out some of these people and cramming down their mortgage principals that doesn't require legislation. I'm interested to hear your thoughts, see if you all think this is workable and worth pursuing...
The idea, which I'm thinking of as "community cramdowns," is to organize big crowds of citizens and activists, backed by support from local credit unions and alternative banking institutions, to go to foreclosure auctions, buy peoples homes and then give them back to them. The key here is that people would have to keep out other potential bidders. This would require forming an intimidating crowd at the scene of the auction to prevent other interested investors from placing their bids. Hundreds of people, lots of signs and a message of compassion for the struggling homeowners would likely prevent most interested buyers from participating in the auction.
After the home is purchased, it's given back to the original homeowner with a new mortgage from the community credit union at the new, lower principal with fair rates that they will be able to pay back. Just like any other transaction like this, the homeowners would have to show proof of income and display under penalty of perjury that they can afford the new mortgage. This kind of arrangement should work for the same crowd of homeowners that judicial cramdowns would have worked for.
The Farmers' Holiday Association did something like this successfully during the Great Depression with farms that were being foreclosed on. Obviously, there is a lot to be worked out in how to make this work with homes in 2009. But it seems, to me, possible and like the kind of thing we need to be taking on by ourselves given the way our government is completely bought out by the big banks.
Please add your thoughts in the comments. Tell me why this is a stupid idea (or a good one, if it is)...
Over at Huffington Post, Professor Lawrence Lessig (whom I work with in advancing public funding of congressional elections) gives people something constuctive to do with the anger over last week's bankruptcy vote:
If you think special-interest influence in Congress perverts our public policy, last week saw an outrage that vindicates that belief entirely.
Sen. Dick Durbin offered a bill that would allow families at risk of losing their homes -- but with an ability to pay their mortgage if their monthly rates were lower and extended over more years -- to legally get that option.
The very banks that taxpayers kept alive with billions in bailouts had the audacity to spend millions lobbying Congress to oppose this bill. They also showered politicians with campaign contributions.
The bill was defeated. Senator Durbin declared that banks "frankly own the place." Will you continue to support politicians who support this corrupt system? Or will you demand that any politician you donate to support reform?
Thousands of people are telling members of Congress they won't get a dime from us unless they co-sponsor Senator Durbin's Fair Elections Now Act to overhaul congressional campaign financing. It would replace our broken system with citizen-funded elections, a hybrid of public funding and small-dollar donations.
Already, our strike has withheld over $1.25 million from politicians (based on contributions last cycle). It's also been featured by ABC, NBC, the Associated Press, Politico, Huffington Post, and others.
Now is the time to send politicians a message that we absolutely demand they change the system.
I sense that a lot of people are sick of just venting. And are sick of the current system. Wanted to make sure you saw there is a campaign you can tap into to fix it.
Indeed, Adam Green has a point when he says that there wasn't a mass mobilization before the cramdown vote. Adam has years worth of great online mobilizing under his belt, and may have forgotten more about it than I will ever know, I'm not going to argue that point with him.
But for me, each new 'moderate'-led defeat under the glorious Democratic trifecta leaves me freshly wondering how much it's possible to reform such lousy human beings through public pressure. Because when I think of all the lousy people I have known in my life, none of them have changed just because I said I really wanted them to.
Neither are the voters Congress' parents, clergy, teachers, counselors, any of that. They aren't juveniles and we aren't responsible for their character.
They are independent moral agents and when they keep doing bad things that they bleeping well know screw over their constituents, they're responsible for those actions. Not me and you for failing to call their office or send them that email. Not the soulless mortgage banking lobbyist they had lunch with. Not consumer advocates for somehow failing to make a dent the last dozen times they briefed congresscritters and their staff on the Very Dire Straits of ordinary Americans.
It isn't that they have no principles. It's that they have bad ones, and they're doing exactly what they want to do.
As the economy and the housing and job markets worsen, middle-class households continue to lose equity in their homes and are less able to afford their mortgage payments. The difficulty is compounded for those locked into predatory mortgages with high interest rates. The federal government and the mortgage industry's continued failure to address the foreclosure crisis adequately could result in as many as 8.1 million foreclosures by 2012. Despite widespread calls for action to confront the crisis, foreclosures increased 81% in 2008. Voluntary mortgage modifications by lenders and banks, encouraged by policymakers in place of comprehensive federal action, have failed to make mortgages more affordable and prevent widespread foreclosures.
The Senate had an opportunity to address the foreclosure crisis yesterday by adopting the Helping Families Save Their Homes in Bankruptcy Amendment, which authorizes federal bankruptcy courts to modify the terms of mortgages on certain primary residences. Influenced heavily by the banking industry, they balked.
Just in case anyone had their doubts about whether progressive groups are serious about holding Blue Dogs, conservodems, and other center-right Democrats accountable for supporting Wall Street and conservative groups instead of supporting their own constituents, doubt no more. The following video is the first paid media campaign from a large progressive coalition designed to hold Democrats accountable on mortgage bankruptcy reform, otherwise known as "cramdown."
It will appear over 250 times in Jonesboro, which is the largest city in the Arkansas 1st congressional district. Jonesboro is also a college town (home to Arkansas St.) It would have cost just as much to run the ad in smaller, nearby towns, so only Jonesboro was targeted.
It will run only on CNN, both in the daytime and during primetime. CNN was chosen because its appeals to news junkies and its viewers lean heavily Democratic (65%-26% according to a poll by Rasmussen Reports) and because MSNBC was not available in the area.
The ad will run over the next three weeks, starting today. By appearing over 250 times in one area, and over an extended period of time, local Democratic news junkies will see it often enough to remember it.
The ad placement cost $5,000, paid for by BlogPac. Such a low price was made possible by the new services offered by SaysMe TV.
House Democrats reached a compromise yesterday on the cramdown provision of John Conyers' Helping Families Save Their Homes Act, and for a change, it was a decent compromise. Proponents of this legislation pretty much managed to keep the cramdown provision intact, meaning that bankruptcy judges will be able to modify mortgages for homeowners facing foreclosure on primary residences. Plus, there were negotiations with Senate Dems and not just New Democrats, who have been acting on behalf of their corporate interests and have made passing cramdown legislation ridiculously and unnecessarily difficult.
If you want to see what I mean, read Dday's excellent post, "Ellen Tauscher's Insatiable Appetite for More Homeless People," which lambastes Rep. Tauscher, head of the New Democrat Coalition and former Wall Street investor, for delaying this much needed legislation and then bragging about it. Then, read the hilarious message Tauscher's office sent to Chris Bowers, which took a defensive tone over the criticism Tauscher has received. Tough shit Tauscher! She's the one who put the interests of banks before her constituents. Not to mention the fact that she has a former bank industry lobbyist working in her office, and is STILL working to restrict the power of bankruptcy judges.
Chances are Conyers' compromised legislation will pass the House tomorrow. And while, as Chris noted, it was a good sign to see Senate staffers participating in yesterday's negotiations, odds are HR1106's counterpart in the Senate will still face a tough battle. That's why it's key to keep Brave New Foundation's petition going that over 17,000 people have signed in the last four days! We have to keep the pressure up on Congress and get these judicial modifications passed.
In my column a few weeks ago, I noted that the pressure from congressional Democrats had forced President Obama to commit to supporting major bankruptcy reforms that would allow judges to force banks to renegotiate their mortgages so that homeowners can avoid foreclosure. Now, Obama is out in Red America bragging about his commitment, as he should:
President Barak Obama said on Monday that he supported changing the rules to let judges modify first mortgages to prevent home foreclosures. Obama made his comments at a townhall meeting in Elkhart Indiana, as he campaigned for an $800 billion economic stimulus package being debated by lawmakers.
"If you are like most people, including me, and you've got one house ... it turns out that under current law you can't modify that mortgage if you are in bankruptcy," Obama told a townhall meeting as he campaigned for an $800 billion economic stimulus package being debated by lawmakers.
"That makes no sense ... that is forcing a lot of people into foreclosure," Obama said. "This is a piece of legislation that I strongly support."
This "cramdown" legislation is critically important. It should have been in the stimulus bill to begin with, but at minimum, it should be passed immediately after the stimulus bill passes. (h/t Atrios)
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