Mortgage Bail-Out Bill Falls Short

July 25, 2008

The mortgage bail-out bill just passed by Congress falls far short, when it comes to holding those responsible for this mess accountable.  Attorney Terry Smiljanich of the Consumer Warning Network recently appeared on the Tampa FOX affiliate’s “Your Turn” talk show to discuss the mortgage bail-out. 

New foreclosure numbers just released by RealtyTrac show home foreclosures are up 120% from a year ago.  Nearly 740,000 foreclosure filings were recorded in the second quarter of 2008.  That means one in every 171 homes received a foreclosure related filing.

The mortgage companies and their executives made billions of dollars on the predatory loans that led to the foreclosure crisis we’re experiencing today.  The Consumer Warning Network’s Terry Smiljanich says the bail-out bill doesn’t do enough to hold lenders responsible for the problems they created.  “I think there needs to be investigations and maybe some people need to go to jail,” Smiljanich said.

At the height of the market, all the lenders seemed to care about was getting a loan closed, getting those upfront fees and making as much money as possible as quickly as possible.  Now it’s left to the taxpayers, many of whom were suckered by these very companies, to bail them out. 

“What about these mortgage lenders engaged in these deceptive practices?” Smiljanich asked.  “What about these large investors that were bundling these mortgages?  They had every warning sign they needed to say what we’re bundling and selling isn’t worth what it’s claimed to be.”

The mortgage bail-out bill essentially offers lenders a cap on their losses for the worst of the worst mortgages on their books.  Remember, these were loans they wrote and already profited from on the front end.  Lenders would voluntarily be able to choose which loans to turn over to the government and limit their losses to 10-percent. 

If a loan is in a neighborhood where the company could still foreclose and make money, they could choose to keep the loan and proceed with foreclosure.  So, in essence, it doesn’t protect homeowners from foreclosure, it protects lenders from losing too much money on a foreclosure. 

Why would seemingly sympathetic lawmakers sell out citizens this way?  Follow the money as they say. 

Recently, Portfolio magazine revealed the bill’s sponsor, Senator Christopher Dodd (D-Conn), benefited from a program under which Countrywide Financial gave loans at favorable terms to the influential and the powerful.  It turns out both Countrywide and Bank of America, which recently bought out the troubled mortgage giant, have been generous donors to Dodd since he became Chairman of the Senate Banking Committee, according to the Center for Responsive Politics.

Just how much influence can money buy?  It seems Bank of America wielded considerable influence in the structuring of the Dodd-Shelby legislation.  Opponents of the bill contend Bank of America essentially wrote the bailout section of the bill.  The National Review Online obtained a copy of a document on Bank of America letterhead that matches the Dodd-Shelby bill almost exactly. 

So, here we are hoping a government bail-out will stem the foreclosure crisis.  Let’s hope the”FHA Housing Stabilization and Homeownership Retention Act of 2008″ actually helps homeowners retain their homes and doesn’t just put more money into the pockets of irresponsible lenders.