March 18, 2011 (Chris Moore)
U.S. Rep. Barney Frank (D-Mass.) has introduced a bill that would force the largest banks and hedge funds to pay for two programs that provide mortgage assistance and vacant property cleanup. Meanwhile in California, State Assembly member Bob Blumenfield (D-San Fernando Valley) has introduced a bill that would require mortgage servicers to pay $20,000 to foreclose on a home.
Frank, who is still fuming at House Republicans for voting to terminate the Department of Housing and Urban Development’s (HUD) Emergency Homeowner Loan Program (EHLP) and the Neighborhood Stabilization Program (NSP) over the last week, views his proposal as a replacement for the two terminated programs.
Frank’s bill would require financial institutions with assets of $50 billion or more and hedge funds with at least $10 billion in assets under management to pony up $2.5 billion to replace HUD’s two terminated programs that were to provide mortgage assistance and vacant property cleanup.
Blumenfield’s bill calls for money collected from the banks to be funneled back into school districts, police and fire departments, small-business loans, among other state and city services and programs. Blumenfield claims the bill is an effort to curb property tax losses from skyrocketing foreclosures in the state, none of which would do anything to help homeowners in foreclosure, but would go along way in helping the state to stuff its coffers in additional revenue…especially when you’re currently short around $26 billion for the current fiscal year.
I think any sensible economist would tell you that neither of these programs are viable solutions to the foreclosure problem and that banks would only pass the cost of these programs on to consumers in the form of higher fees and mortgage interest rates which would be detrimental to the housing recovery because even less people would now qualify for a home loan.
As Republicans continue to move against such programs with the notion that the government, a.k.a. the taxpayers, should not pay for it, Democrats are taking up the strategy of charging banks whose costs are just passed on to the consumers. We’ve seen this in the form of higher bank fees and credit card fees as a result of the Dodd-Frank Finance Reform Bill and skyrocketing insurance premiums as a result of the Healthcare Bill.
Tags: Barney Frank, HUD, EHLP, NSP, Bob Blumenfield, foreclosure programs, big banks, hedge funds, mortgage servicers