Frank Threatens Banks: We Will Make You Stop Foreclosures

WASHINGTON — A senior House Democrat threatened banks Wednesday that if they don't volunteer to save more homeowners from foreclosure, Congress will make them.

In a sternly worded statement, Rep. Barney Frank said Congress will revive legislation that would let bankruptcy judges write down a person's monthly mortgage payment if the number of loan modifications remain low.

Frank, chairman of the House Financial Services Committee, also said his committee won't consider legislation to help banks lend unless there is a "significant increase" in mortgage modifications.

Frank's statement was aimed at adding momentum to a deal struck Tuesday between Treasury Secretary Timothy Geithner and more than two dozen mortgage companies. The two sides agreed to set the goal of adjusting 500,000 loans by Nov. 1.

But it was far from clear whether that would happen.

Loan servicers say they are still trying to play catch up to a deluge of customer requests by hiring and training thousands of new employees. Banks also are trying to sort through which customers face a legitimate financial hardship.

Also, many loans have been bundled and sold to investors as securities, complicating efforts to modify the terms.

Congress tried earlier this spring to pass legislation that would give people a chance to keep their homes by filing for bankruptcy. But while President Barack Obama said he supported the measure, he did little to see it through and it was defeated amid an aggressive lobbying effort by banks.

The measure failed in the Senate by a 45-51 vote, falling 15 votes short of the 60 needed to overcome procedural hurdles.

"People in the servicing industry and in the broader financial industry must understand that if this last effort to produce significant modifications fails, the argument for reviving the bankruptcy option will be extremely strong, and I think there is a substantial chance that the outcome will be different," Frank said.

Comments

[Peter007]

As I remember my recent history from 2008....
Banks began writing down their assets . These write downs caused their earnings to fall and stock price to fall. As the stock prices fell, their capital fell and they were unable to make loans.
CREDIT CRUNCH !! Banks go bankrupt. !
Enter Uncle Sam with his boat loads of cash to bail out the banks..
Situation stabilized.
Fast forward today.
Barnie requires banks to accept bankruptcy rulings. This new law will diminish the value of the banks loan portfolio. It also raises interest rates because loans subject to modification by a judge are riskier loans.
Bam !! New credit crunch and welcome to September 2008 again.
Isn't it GREAT ?

[uvymopka]

What sort of grade did you get in "recent history"..­.....you need to retake the class. And remember that there was a world before 2008, and it has a great deal to do with what is going on in 2009.

[vandegrasse]

Atta boy, Barney Frank. You've had some missteps but now you're on track!

[mollyjackson]

Although Frank now blames Republicans for the failure of Fannie and Freddie, he spent years blocking GOP lawmakers from imposing tougher regulations on the mortgage giants. In 1991, the year Moses was hired by Fannie, the Boston Globe reported that Frank pushed the agency to loosen regulations on mortgages for two- and three-family homes, even though they were defaulting at twice and five times the rate of single homes, respectively.

[mollyjackson]

Now that Fannie Mae is at the epicenter of a financial meltdown that threatens the U.S. economy, some are raising new questions about Frank's relationship with Herb Moses, who was Fannie’s assistant director for product initiatives. Moses worked at the government­-sponsored enterprise from 1991 to 1998, while Frank was on the House Banking Committee, which had jurisdiction over Fannie.

[mollyjackson]

Now that the bubble has burst and the "systemic risk" is apparent to all, Frank blithely declares: "The private sector got us into this mess." Well, give the congressman points for gall. Wall Street and private lenders have plenty to answer for, but it was Washington and the political class that derailed this train. If Frank is looking for a culprit to blame, he can find one suspect in the nearest mirror.

[mollyjackson]

Frank's fingerprints are all over this fiasco. Frank insisted that Fannie Mae and Freddie Mac were in good shape. Five years ago, for example, when the Bush administration proposed much tighter regulation of the two companies, Frank was adamant that "these two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis." When the White House warned of "systemic risk for our financial system" unless the mortgage giants were curbed, Frank complained that the administration was more concerned about financial safety than about housing.

[sueinmn]

If you follow the real money trail, much of the US money went to foreign banks to prevent them from melting down because of what WE CAUSED. Why??? Prevent the US from being shunned round the world??

So WE WILL PAY for years a debt that WE DID NOT BENEFIT from. Its like throwing money out the window, lost, simply lost. We cn never earn enough in a life time to repay this mess. and Yet NO ONE goes to jail or even gets fird.

Whats wrong here? Why no outrage from us the people? (I mean more than blogging your anger)

[MichaelLittleBig]

Sueinmm,
I believe that you have hit the mark. Where the outrage? Where is the anger?
Richard Nixon once talked about the silent majority.
Could it be possible that we have the silent angry majority? Is it possible that the frustration of these people is so overwhelmed that they can’t express their outrage?
My fear is what happens when their anger or outrage turns to action?
I don't worry about the people who are yelling and complaining. I am deeply concerned about the ones that are silent.

[cjt1957]

First I force you to make loans to people that can not afford them. Then when they quite paying their note, I don't want you to forclose. Yes that seems right to me.... Maybe this can be Fannie Mae and Freddy Mac's new business model...

[sueinmn]

Not the entire case sir! You fail to see the entire picture. Until you lose your job and have no way to pay, you will never understand. Are you a homeowner and possibly have owned it now say 10 years? I hope you feel the pain to understand the crisies. Your hypocracy or ignorance will not allow you to open your mind and see it is not all those you blame it on.

[outragedbystupidity]

if you lose your job and have no way to pay (which has happened to many people in ALL prior recessions), then you have to scramble. never before have we expected the government to make people whole when life takes a nasty turn (other than existing social services). did i say recession? i meant depression. in a depression, the entire economy must restructure. it takes a long time and there will be pain.

[sueinmn]

Frank has good ideas but with out willing participants to assist him, he can do nothing. The WH and Fed is not willing to punish anyone. WHY?

Justice is tow faced in this country. The Constitution and Bills of Rights is just worthless paper these days.

View this video if you really want to open your eyes and put the facts together to a larger picture for America. Itll scare the heck out of you. All documented fact!

http://www.youtube.com/watch?v=eAaQNACwaLw

[tompoe]

He's many months late with this. Why wasn't this done the day Obama took office, as he promised during his campaign? Frank was supposed to have this on his desk in January.

[Jack Lewitz]

I think we should " Keep Politics Out" of the foreclosure mess. As a realtor specializing in Short Sales and Foreclosures nothing amazes me. I am against a policy that would force homeowners to go to court, to avoid foreclosure. Such a court system would only delay the process and right now Short Sales are taking 4 months or longer to get approved. I think what needs to get done is to go directly to the investors, ask them if they want to modify or approve a short sale because both will net them more money than a foreclosure. Finally if the Federal government wants to get involved they can also guarantee a portion of the loan lost if the investor renegotiates a loan or takes a loss on a "short sale" But something needs to get done now because as I see it more homes will be foreclosed as a result of the number of people loosing their jobs. In illinois, I think unemployment is at 12 %.

[Dialogue]

A few years ago, an elderly philanthropist stated that "money is like manure, it needs to be spread around" (sic). Today, apparently, major banks and corporations believe the opposite, that money should be conserved, hoarded and locked up, accept when it comes to granting huge bonuses and pay packages for a few of the senior management and staff.

The bottom line - Job losses lag economic distress!

[swisskabab]

Hey Barney Frank -- stop talking and put atleast a Wall St. crook from these bank in jail -- do your job.

[fed U]

just like in the last bull market and econ recovery, main street gets left in the cold while wall street prospers...
hat tip to... http://www.iamned.com

[cubby 31]

I continue to be amazed by this Frank character, and yes, he is a character, every time he speaks. He's actually pretty d@mn politically brilliant. He enabled this chaos with others on the left and right, then acts as if he is our savior by swooping in to save the day and grand-stand for all those to see.

At a hearing in 2003, Representative Barney Frank (D-Mass.), now the chairman of the House Financial Services Committee, referred to an "arrangement" between Congress and the GSEs that tracks rather explicitly what actually happened: "Fannie and Freddie have played a very useful role in helping to make housing more affordable, both in general through leveraging the mortgage market, and in particular, they have a mission that this Congress has given them in return for some of the arrangements which are of some benefit to them to focus on affordable housing."

"arrangeme­nt"....

[Lemmy]

Great point.

"There's no crithith!"

Tell those folks they bought a house they couln't afford and to get packing.