The number of households facing foreclosure increased by
nearly 80 percent in the
region between 2005 and 2007 and increased by another 50 between the first half
of 2007 and the first half of 2008. These numbers are only expected to increase
in the coming months. A significant number of these foreclosures were the
direct result of imprudent and risky lending practices driven by Wall Street
firms who would be bailed out in this proposal.
Any bailout must also include a component that aids
distressed homeowners. Such a component would include aggressive loan
modifications, including principle reductions where appropriate, that would
help troubled homeowners afford their mortgages and stay in their homes. It
would also include a component allowing for judges to modify loans during the
Chapter 13 bankruptcy process. It is estimated that such a change could aid
almost 600,000 troubled homeowners
Additionally, the bailout must address the issue of the
growing numbers of foreclosed, vacant properties in cities across the country.
In the
region, the number of properties that were acquired by banks through
foreclosure auctions increased by 231 percent between 2005 and 2007. Given the
weak state of the real estate market, a substantial number of the 23,000
foreclosed properties that have reverted to bank ownership between 2007 and the
first half of 2008 are almost certainly vacant. These properties are likely to
have significant negative impacts for neighborhoods and municipalities. The
bailout must also facilitate the rapid transfer of these properties to local
governments and community development corporations who will be better able to
return them to productive use.
Finally, any bailout of Wall Street must be tied to
significant regulatory reform. Although
this is a long term proposition, it is key that safety and soundness standards,
community reinvestment obligations, and consumer protections be expanded to
include non-depository financial institutions who were the core cause of the
current financial crisis.
strongly urges Congress not to approve a bailout of Wall Street firms without
strong concessions from them and significant aid to troubled homeowners.