Shelter from the storm

No bailout, two modest Senate bills offer help to Georgia homeowners facing foreclosure

Published on: 03/14/08

The House ought to embrace these bills, which will assist homeowners in keeping their homes. And that's important, not only for the individual borrower, but to the state of Georgia's economic well-being, as well.

"Foreclosure is like a disease that undermines housing prices, consumer spending, construction jobs, the strength of the real economy, and the fiscal positions of state and local governments," says international economic law professor Timothy A. Canova of California's Chapman University School of Law. "Once this downward cycle takes hold, it is not an easy thing to revive the economy."

To forestall a housing collapse, the Federal Reserve announced this week that it's bailing out banks and investment houses with $200 billion in Treasury securities loans. It's only fair that the state Legislature do something for the other victims of the mortgage meltdown, the homeowners. These two Senate bills are modest in scope and involve no tax dollars.

Despite the government aid to banks, securities firms and hedge funds, there's resistance to assisting the borrowers, who instead are treated to tongue-clucking platitudes about "buyer beware" and "living above your means."

"A 'buyer beware' approach only serves to absolve those lenders that have engaged in such shady practices," says Canova. "The idea that the burden of this problem should fall exclusively on borrowers who entered into extremely risky loans — such as adjustable rate mortgages with balloon payments, interest only, negative amortizations — removes all responsibility from government for providing a fair and orderly marketplace. The subprime mortgage market became rife with deceptive and predatory lending practices."

The Federal Reserve has spent billions of dollars purchasing debt securities since August to bolster financial markets and improve the balance sheets of hedge funds and investment banks.
"These subsidies are never voted on by any state legislature or Congress, but it is bailout nonetheless," Canova says. "So apparently, it's ruthless competition for ordinary mortgage borrowers, but government subsidies and bailouts for large financial institutions." Surely, the Legislature can do a little something to help ordinary citizens.

To read this story in its entirety, please visit: http://www.paradigmshiftpr.com/senatebills.htm