Help Americans Struggling with High Cost Mortgage and Credit Card Debt

Today, President Obama laid out bailout plan that will place more emphasis on transparency and accountability. Sounds like a fantastic start, CU has a couple of strong suggestions to add in order to help consumers.

In describing a public-private investment fund to buy the toxic assets of banks, as well as a program to enable more credit to flow to consumers, Treasury Secretary Geithner emphasized that the Administration would ensure that every tax dollar would go to economic revitalization and lending.

The Secretary did not lay out specific plans for addressing the mortgage foreclosure problem, suggesting that the Administration would announce a comprehensive plan of action in the weeks ahead. This will be most welcome as more reforms are needed to ensure millions of Americans with unfair mortgages don’t lose their homes.

In a fact sheet on the Financial Stability Plan put out today by the Treasury Department, the government suggested that they would commit $50 billion to buy up troubled mortgages and modify them in an effort to prevent foreclosures. The Administration should aslo require all lenders who get government funds to modify mortgages for homeowners so they can afford to keep their homes over the long term. If the current foreclosure trend continues as expected, $50 billion may not be enough to effectively address the foreclosure crisis.

Here is CU's To Do List for President Obama and Congress in order to prevent foreclosures:
• Imposing a six month moratorium on foreclosures until effective, wide-scale loan modification programs are in effect.
• Giving bankruptcy judges the power to reduce the amount owed on a mortgage loan to the current value of the house.
• Providing permanent statutory authority to incent loan servicers to modify terms and loan balances.
• Require lenders to modify mortgages so that monthly payments are no more than 38 percent of a borrower’s income, and allow flexibility for borrowers who have lost their jobs, lost a second income, or suffer other economic hardship.

To learn more about how you can help work for strong reforms to address unfair mortgage lending practices. Go here.
The Treasury Department also announced that it will provide $20 billion in bailout funds to back up a Federal Reserve Board “credit facility” program to purchase up to $200 billion in “non-mortgage asset backed paper” - including securitized credit card debt. We are urging the Obama Administration to make sure that all credit card debt purchased through the Term Asset Backed Securities Loan Facility (TALF) meets standards for fairness and truthfulness, including the new consumer protections adopted by the Federal Reserve Board in December. Those protections are not scheduled to go into effect until July 2010. But that's another story.
Before the federal government buys credit card backed securities, there should be an end to retroactive rate increases and high gotcha fees. Let’s make sure taxpayer money which makes consumer credit available does it in a way that doesn’t harm the consumers.