(Boston, MA) The Neighborhood Assistance Corporation of America, (NACA) recognizes the extraordinary precedent that President Bush is taking to address the mortgage crisis, but it critical of its limited impact on homeowners at risk of foreclosure. This new standard for government intervention in the mortgage crisis is recognition of that the overall mortgage industry is being impacted and that if immediate and dramatic action is not taken, that it will push the economy into recession. This is the first time during the seven years of the Bush administration, that is anti-regulation and pro business, that they have taken across the board action to limit damage by an industry. .
The mortgage industry has been pushing defective products since 2000. These mortgage products were never about long-term homeownership, but about massive profits for the lenders, investment bankers, brokers and rating agencies. NACA has been in the forefront of combating the mortgage crisis and has provided the most significant solution to date with its agreement with Countrywide that permanently reduces the interest rate for homeowners to what they can afford – often to five or six percent.
“The limited scope of the announcement will be disappointing for the millions of homeowners at risk of foreclosure,” states Bruce Marks, NACA CEO. “President Bush is abandoning the over one million homeowners already on the brink of foreclosure, and for the eligible homeowners this is only a temporary delay of foreclosure.”
What the administration is providing for a limited number of homeowners, is analogous to having a defective automobile that has no brakes, and rather than fixing the brakes, you are able to park it for three years while making the payments and then drive it down the hill full speed. The inevitable result will be a crash or in mortgage terms – foreclosure. This new standard for government intervention will provide the opportunity to further limit the interest rate increases and roll back many others as the mortgage crisis deepens during the next three, six and twelve months.
The only real solution is to go back to responsible lending. Variable rate loans should both increase or decrease depending on interest rate changes rather than strangulation ARMs that often double in rate regardless of market changes. These are defective mortgage products whose interest rate increases must be permanently stopped and rolled back to what the homeowner can afford.