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J. Mijin Cha on January 3, 2008 - 9:57am
Not surprisingly, the Bush Administration's proposal for fixing the subprime lending crisis is an industry-led deal that involves completely voluntary actions to fix the current crisis and will ultimately help only a few of the millions of people who have either lost or are in danger of losing their homes. With absolute failure at the federal level, it is again up to states to step in. In two recent editorial pieces, the executive directors of the Progressive States Network and the Drum Major Institute called on New York Governor Spitzer to impose a six-month moratorium on foreclosures to stop the rapidly increasing rate of home loss, a policy all governors should enact. A moratorium would give lenders incentive to restructure loans on fair terms and fight back against the Wall-street backed predatory lenders.
We previously highlighted how states are taking over for federal inaction, and misaction, in fighting the current mortgage crisis. New York Assemblyman Jim Brennan is introducing legislation to impose a one-year moratorium on home foreclosures. Massachusetts became the first state to impose a moratorium last year. Without action, in the next two years, as many as 100,000 homes would be subject to foreclosure in New York. Nationwide, home foreclosure filings have increased an incredible 68% over the period of just one year. The rate is predicted to increase even further this year as payments rise on roughly 1 million home loans. Movements are also underway in Michigan, Ohio and Texas to adopt foreclosure moratoriums.
As a recent report by the US Conference of Mayors highlighted, the ripple effects on local economies from mass foreclosures would be devastating. Nationally, groups like the AFL-CIO and the NAACP are also calling for a foreclosure moratorium to give homeowners a chance to re-finance and restructure their subprime loans. Illinois Congressman Danny Davis, facing a rate of 70 foreclosures per square mile in his district, is proposing legislation that would implement a 90-day moratorium on foreclosures, free homeowners from the threat of eviction during the winter months, and allow lenders to rent the homes at fair market value while the property is in foreclosure proceedings.
Senator Hilary Clinton has also called for a three-month moratorium on foreclosures. Presidential candidate John Edwards goes even further and would impose a moratorium on foreclosures until he, as president, would decide that the housing crisis is over.