Seems like it could have been the answer and can be in the future:

Imagine that a few years ago, at a time when you were renting your home, a fast-talking lender had approached you and explained how you could afford to buy your first house. The monthly payments seemed affordable.

At the closing, you were swamped with forms, dutifully signing where you were told. Recently you discovered that one of the forms you didn’t read at the closing explained how your monthly payments would rise three years after the closing. Now that those years have passed, you can’t afford the payments. You have defaulted, and now face the prospect of losing your home.

Now suppose that the process had been completely different. Well before signing the papers, you had to watch a video warning you about the pain foreclosure brings. You were required to work through a budget that took into account the increase in your mortgage payments and helped you understand how much money you would have to meet your other expenses after you made your mortgage payments. A credit counselor explained the consequences of taking out the loan and countered the influence of the fast-talking lender. Might you have decided against taking out the loan? And if millions of other borrowers had had a similar experience, might we now not be in the crisis we are in? (hat tip Consumer Law & Policy Blog)

This is truly pathetic . . .

Secretary of Housing and Urban Development Steve Preston said the centerpiece of the federal government’s effort to help struggling homeowners has been a failure and he’s blaming Congress.

The three-year program was supposed to help 400,000 borrowers avoid foreclosure. But it has attracted only 312 applications since its October launch because it is too expensive and onerous for lenders and borrowers alike, Preston said in an interview. (link)

From the NY Times Editorial Board:

The mortgage crisis that has placed millions of Americans at risk of losing their homes has been especially devastating for black and Hispanic borrowers and their families. It seems clear at this point that minorities were more likely than whites to be steered into risky, high-priced loans — even when researchers controlled for such crucial factors as income, loan size and location.

What’s new right? Well what can we do about it?

The Congress that takes office in January can start to deal with this problem by strengthening fair-lending laws, especially the Community Reinvestment Act, which encourages fair, sound lending practices while requiring banks to lend, invest and open branches in low- and moderate-income areas.

Yes.

Lawmakers should also extend that law to cover the often fly-by-night mortgage-lending companies that helped drive the subprime crisis. Those companies saddled entire neighborhoods with risky, high-priced loans that borrowers could never hope to pay back, sold those loans to Wall Street and then went out of business.
Congress needs to keep in mind that many of those players are surely to be back in operation somewhere down the line. Some already have returned in the guise of offering to help homeowners avoid foreclosure.

Yes.  As an aside, f you are in foreclosure, unless you are in the most rural of locations, there is no reason that you should pay one of these foreclosure assistance groups to negotiate a loan modifciation.  These services are available for free by way of city and state funded housing counselors in almost every major city.  Most of these mortgage consultants will just take your money and then not do anything.  And, in any event, not-for-profits, sometimes funded by your tax dollars, will help you for free.

Think about it.  When is the last time you accepted a service by paying thousands of dollars, before you got anything?  Most of these foreclosure rescuse places that charge ask for money up-front. Ask yourself, why that’s a good deal. Just a tad of advice for people struggling with their mortgage.

In other sobering news:

55 percent of loans to African-Americans, 40 percent of loans to Hispanics and 35 percent of loans to American Indians fell into the high-cost category, as opposed to about 23 percent for whites. There also were troubling gender differences. Women got less-favorable terms than men.

Seriously.

As I have recently been learning more about the mortgage meltdown, it has become apparent to me that if these entities had been better regulated we would not be where we are today.

I hate you . . . rating agencies.

From the Bush administration? What is going on in the world?

Senior Bush administration officials are completing a plan that could help up to three million homeowners struggling to pay their mortgages to stay in their homes, three people briefed on the proposal said Wednesday.

The initiative could be the most sweeping government effort directed at mortgage borrowers since the financial crisis began last year. Under the plan, the government would agree to shoulder half of the losses on home loans if mortgage companies agreed to lower borrowers’ monthly payments for at least five years, according to the people briefed on the plan who asked not to be named because details were still being negotiated. (link)

From the National Community Reinvestment Coalition:

Highlights of the Emergency Economic Stabilization Act of 2008

America is struggling with the worst financial system crisis since the Great Depression. Immediate action is essential to stabilize the markets and the US economy. Unfortunately, The Emergency Economic Recovery Act of 2008, currently being debated in Congress, will not achieve those goals. The bill directly and meaningfully addresses financial liquidity but fails to seriously address the core problem underlying the current financial crisis: massive home foreclosures. The bill does not mandate foreclosure prevention, and as a result leaves open the prospects for further significant economic disruptions and future emergency federal bailouts. The bill also inadequately protects taxpayer investments in the financial system bailout.
The following points describe the ways in which the bill falls short of resolving the current crisis or even meeting appropriate oversight standards it purports to achieve.

No meaningful loan modification mandate
Federal agencies are required only to encourage, but not to mandate modifications of loans purchased by the federal government. The bill lacks a mechanism to systematically modify loans held in securitized pools. The bill does not provide guidance as to what loan modifications may be reasonable and desirable. The bill does not address accounting rules or the tax implications that might accompany loan modifications. The bill does not address challenges presented with second mortgages.

Uncertain valuation approach by Treasury Department
Treasury is given the latitude to determine the final purchase price of problem assets from financial institutions. No current valuation exists to determine the price of these problem assets. If assets are purchased at full value as opposed to current market value, meaningful modifications will not be possible without unnecessarily incurring significant taxpayer subsidies. No Congressional oversight is required to modify the Treasury Department’s approach to purchase failed assets.

No restrictions on financial assets purchased
According to the Congressional Budget Office, “the Secretary [of the Treasury] would have the authority, if deemed necessary to promote stability in the financial markets-to purchase any financial asset at any price and to sell that asset for any price at any future date. That lack of specificity…makes it impossible at this point to provide a meaningful estimate of the ultimate impact on the federal budget from enacting this legislation.”

No explicit loss protections for taxpayers
Treasury is to receive equity in the form of non-voting stock or senior debt from companies that participate in the program. The bill does not define what an appropriate equity stake may be, how it would be structured or how it would work. If losses to taxpayers occur, the legislation requires Treasury to design a method to recapture those losses after five years. How, or whether, this measure will be enforced in five years remains uncertain.

No limits on executive compensation
The bill does not limit executive compensation. An institution that sells more than $300 million in assets to the Treasury would be subject to additional taxes, including a 20% excise tax on golden parachute payments triggered by events other than retirement, and tax deduction limits for compensation limits above $500,000. This means that an executive, for example who receives a $25 million golden parachute with a 20% excise tax would walk away with a $20 million bonus—paid for by the American taxpayer.

No anti-predatory lending provisions
The bill does not contain any provisions that purge unfair and deceptive lending practices from the mortgage market, leaving the door open to a future foreclosure crisis.

No bankruptcy help for homeowners; $700 billion for banks
The bill provides $700 billion in taxpayer money to fund bankruptcy avoidance for financial institutions. It fails to include a provision to protect homeowners that would cost the federal government not one cent. Current bankruptcy law prevents homeowners in financial trouble from pursuing loan modifications and resuming loan payments as part of bank restructuring. In contrast, wealthy consumers can seek modifications of loans for their second homes, investment properties, family yachts and other non-essential items.

Although there are great reasons to support the bailout bill that went down in flames today, I do not.

In a way I had a vague hope the bill would pass, just so I could go back to not thinking about it, and not worrying about the intersection of my job and a major financial crisis.

But, the old idealistic revolutionary in me said, I kind of hope it fails.

What we witnessed was oddly a great bit of unintentional bipartisanship between Progressive Democrats and Extreme Conservatives. Progressives were simply not willing to bailout Wall St. in response to its financial negligence, or for that matter give up the great programs they have been waiting for (universal medical care, a massive switch to alternative energy etc.).

Conservatives, at least some of them, just could not swallow their (now demonstrably hollow) blind reliance on the wonders of unadulterated free market capitalism.

Sometimes, the enemy of my enemy is my friend:

The phrase, The enemy of my enemy is my friend is usually considered a foreign policy doctrine that is commonly used to confront a significant enemy through an intermediary in order to undermine the enemy and in a “cold” manner, as opposed to a “hot”, direct confrontation. It’s an ancient proverb that means that solely because two parties have a common enemy, they are friends. Often described as an Arab proverb, there is also an identical Chinese proverb and both may be an extension of another Chinese proverb that says, “It is good to strike the serpent’s head with your enemy’s hand.” A historical example of this policy occurred when the Greeks were attacked by the Persians at Thermopylae; the Greek city states put aside their differences and fought the common enemy (link).

Both sides stood by their guns, and you’ve gotta give them credit. Although, I can’t help myself from pointing out that Republicans views have been totally and forever discredited, so maybe their side was just stupid.

Why did I want to bailout to fail?

Because there has to be a better and cheaper approach than that offered by the people who got us here, that does not reward those same people.

There’s collections of alternative plans all over the web.

I haven’t been collecting all the links, but I’ve read several with promise. Here’s one from Daily Kos and one from Open Left.

Does that mean there is not a serious crisis? No. This is real. For better or worse America runs on spending and credit. Whether that is a wise model should now be all the more questioned. But, a shift to a different economic model is a down road issue.

I just have faith that there are progressives out there smart enough to come up with a better plan.

If we don’t do this done the right way,instead of just quickly, aside from a difference in foreign policy, who is President is going to matter a lot less.

Make yourselves heard goddammit!

Proud of Governor Patterson’s stand in the WSJ:

New York is both the epicenter and chief victim of the current financial cataclysm. That is why I strongly support immediate federal action to stabilize the financial markets, but also insist on simple yet critical changes that will not hinder instant action.

. . . .

The bailout’s structure must be altered. While the credit markets must be reassured, homeowners must also receive help to avoid unnecessary foreclosures. The Center for Responsible Lending projects 6.5 million foreclosures in the next several years. This will cause a $356 billion decline in surrounding property values for the 46 million families that live next to foreclosed homes.

Therefore, once the Treasury purchases distressed financial real-estate assets, I strongly urge the government to require mass modifications to owner-occupied home loans.