Months too late, the Obama administration is pushing the finance industry for further action to stem the vast tide of home foreclosures.
The administration summoned 25 executives from the mortgage-service industry to Washington Tuesday to push for more generous terms for a greater number of delinquent and at-risk homeowners.
Back in May, however, when the banks lobbied against legislation that would have allowed bankruptcy judges to change the terms of loans -- known as "cramdown" -- the White House was silent. The day after the cramdown amendment died in the Senate, with more than a dozen Democrats voting against it, the administration put out a statement saying it still wanted "appropriately tailored bankruptcy language."
They, like homeowners, are still waiting.
Sen. Dick Durbin (D-Ill.) at the time declared that the banks "frankly own the place" -- and Senate Banking Committee Chairman Chris Dodd (D-Conn.) expressed frustration that President Obama's support for the measure was shaky. "They could have done -- there was always some ambivalence about this," Dodd said.
Since then, the situation for homeowners has only gotten worse. The administration's plan to protect 3 to 4 million homes over the next three years has barely reached 160,000 homeowners, and another 2 million are expected to lose their homes by the end of this year, according to prelimary Treasury figures.
Homeowners living around foreclosed properties are also being hurt. The nonpartisan Center for Responsible Lending expects at least 2.4 million more foreclosure filings in 2009, costing the roughly 70 million surrounding households a combined $500 billion in lost property value. By the end of 2012, the center projects 9 million foreclosures and $2 trillion in lost property value.
Dodd deemed the administration's response to the problem "disgraceful" in a hearing two weeks ago. "Everybody understands that getting out of this broader crisis requires that we stabilize our housing market and stem the tide of foreclosures," he said.
That would require the banks to fundamentally change their business practices, however. Banks still have powerful incentives to go to foreclosure rather than work out mortgage modifications.
Tuesday's meeting was prefaced by a harsh July 9 letter from Treasury Secretary Tim Geithner and Housing and Urban Development Secretary Shaun Donovan to the 27 participating mortgage-servicers, telling them to make more and better loan modifications.
Next month, the administration says, it will announce performance results for each company -- how many modifications each has made, how quickly and so on. If the banks haven't made progress by then, that might at least give Durbin, who has said he'll push to legislate bankruptcy reform again, a new opening. Then again, the banks might just buy another victory.
While Treasury and Housing officials meet with the banks Tuesday, protesters led by ACORN plan to rally outside the Washington office of Goldman Sachs, which along with Litton Loan Services still refuses to join the Obama administration's Home Affordable Modification Program and renegotiate with homeowners facing bankruptcy. ACORN released a policy paper Monday night targeting TARP recipients who are still dragging their heels on mortgage modifications or, like Goldman, outright refusing to consider them.