Now that Congress has passed the $700 billion bailout bill to address the credit crunch, there is an urgent need to address the root causes of today's economic crisis – massive foreclosures in our communities. Going forward, CRL calls on Congress to act quickly to assist families facing foreclosure.
"Any plan that fails to stop foreclosures will ultimately fail to fix the crisis," said Michael Calhoun, president of CRL. "Wall Street firms and banks caused a massive foreclosure crisis in this country, and this bailout provides no meaningful way to end it. It doesn't stop the epidemic of foreclosures that will continue to drag down property values for everyone."
An estimated 6.5 million foreclosures are expected over the next several years. CRL estimates that 40 million families that happen to live nearby will lose $352 billion in property values as a result. (For more details, see CRL's recent update on the impact of subprime foreclosures and their impact on home values.)
"Existing programs to modify mortgages can't and won't help enough homeowners quickly enough to fix what ails the economy. Voluntary modifications continue to be dwarfed by foreclosures. Our housing and economic crisis will not be repaired until we act to prevent unnecessary foreclosures," Calhoun said.
Effective approaches to the foreclosure problem were widely available but were left out of the final package—approaches that imposed real duties on Wall Street and banks and did not cost any tax dollars. This included providing homeowners with the same right in bankruptcy to judicial modification of their home loan that Wall Street firms have for their debts. This provision could have saved up to 600,000 families from foreclosure without any cost to taxpayers.
We call on Congress to address the foreclosure crisis directly with new legislation as soon as possible.
For more information: Kathleen Day at (202) 349-1871 or kathleen.day@responsiblelending.org; Chris Kukla at (919) 313-8520 or chris.kukla@responsiblelending.org; or Ginna Green at (510) 379-5513 or ginna.green@responsiblelending.org.