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DC Lawmakers from California Weigh in on Foreclosure Crisis

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(Sacramento, CA)
Monday, March 12, 2012

California is being hit harder with foreclosures than almost any other state. And as anyone who lives near a foreclosed property knows: having a vacant home on the block tends to drive surrounding home prices down. That's part of the reason that as many as eleven million homeowners now owe more on their home than they're actually worth. Democratic Senator Dianne Feinstein says her office is doing what it can.

FEINSTEIN: "What we've taken to doing is writing a letter, for every bona fide case we can find, to the CEO of the bank, and begging that the bank president or CEO take a look at the case."

While heartfelt, Feinstein's method brings no guarantees. And with Congress divided lawmakers have been unable to settle on a national solution. But the president has taken action. Under his new initiative two to three million homeowners will be able to more easily refinance their mortgages…locking in lower interest rates and saving around one thousand dollars a year. Feinstein says it's a good plan.  

FEINSTEIN: "I think there's no question that the president is doing the right thing here. You know we bailed out these banks. It's time for them to give back and be of help."

The new program is more stimulus than long-term solution, according to Karen Dynan who is a fellow at the Brookings Institution.

DYNAN: "The president himself compared this to a tax cut, it's about putting more money into people's pockets, which is important. We have a very weak economy right now."

With White House prodding last year Fannie Mae and Freddie Mac rolled out a similar program and millions of borrowers were expected to get relief. But early reports suggest that only a few hundred thousand people took advantage. Democratic Congressman John Garamendi says the effort came with built in limitations.

GARAMENDI: "The earlier programs were structured in such a way that most homeowners could not take advantage of them. And the banks were not making it happen. A lot of the problem resides with the banking community, basically, refusing or slow walking the solutions and the programs."

Those lenders, at least the five biggest, did agree to a twenty six billion dollar settlement of a lawsuit alleging bad mortgage practices. Thousands of California homeowners could have their mortgages reduced from that. But estimates are that nearly seven hundred billion dollars in bad mortgage debt remains on lender's books nationwide…making twenty six billion dollars a drop in the bucket. That's why Republican Congressman Wally Herger says fixing the housing crisis must be about more than mortgage programs. He says other administration policies are weighing down the broader economy.

HERGER: "It's not just in housing. It's in every aspect of our economy. People are laying people off; people are having their hours cut back."

Herger is skeptical of the president's new refinancing initiative. He says the more the Obama Administration tinkers with economy the more it hampers the recovery.

HERGER: "We're certainly hurting in northern California - the housing market is hurting all over, but I'm not convinced this is the way to do it and perhaps could just prolong the misery we're already in."

The Republican Speaker of the House John Boehner has also voiced skepticism over the president's plan, making it harder for the administration to broaden its program. Senator Feinstein says that sets the stage for a political battle over housing this fall.

FEINSTEIN: "If there is strong Republican opposition in the House, we know where the opposition came from, and this is a presidential campaign and this will be a presidential campaign issue and the people can judge who's on their side."

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