Reading the Bailout Bill for You

I’m forcing myself to read the text of the bailout bill. I’m only at the beginning. But I already see that the Secretary of the Treasury has a lot of power. And who will that be after the election? That’s the first issue. But let’s get to the part where they help the homeowner.

The most important issue for me has always been WHY CAN’T WE JUST TALK TO THE MORTGAGE COMPANY OURSELVES? That’s the easiest way to solve this: I go to my mortgage company, which happens to be a unit of the failed Lehmann Brothers called Aurora Loan Services. I say to it, “I’m $100,000 under water in my house right now, and my mortgage will adjust soon. Why don’t we make a deal where you lower my interest rate to 3% so I can afford my payments, or tack the interest on to the end of my loan?” Then I call up Citibank FSB, my home equity line provider, and I say “I am $100,000 under water on my house right now and your line is worth nothing. Please lower my interest rate so I can continue to pay.” And we make a deal. I stay in the house, they continue to get some money, although not all the money they would have made, and everyone goes away moderately happy until things settle out and I either sell the house or die.

I actually got on the phone a week ago and asked that question of my mortgage company. You know what they said to me? We can’t help you because you are current. And why am I current? Because my ethics won’t let me put the keys in the mailbox and walk, and because I want to be on the board of my new bank and I have to have an unblemished credit record to be so. So the woman on the other end of the phone told me to wait until October when the bill passes and see what happens.

So here’s what I see in the bill:

It says vaguely that: “the Secretary shall implement a plan that seeks
to maximize assistance for homeowners and use the authority of the Secretary to encourage the servicers of the underlying mortgages, considering net present value to the taxpayer, to take advantage of the HOPE for Homeowners Program under section 257 of the National Hous ing Act or other available programs to minimize foreclosures. In addition, the Secretary may use loan guarantees and credit enhancements to facilitate loan modifica tions to prevent avoidable foreclosures.”

But then it says: Secretary shall consent, where appropriate, and considering net present value to the tax payer, to reasonable requests for loss mitigation measures, including term extensions, rate reductions, principal write downs.

So we (the plain old folks) get the ability to do what I just tried to do without the government’s intervention. We get to make a deal to stay in our homes. And they have to implement this within 60 days of the passage of the act.

So don’t look it as a bailout bill for Wall Street. Look at this as what should have been done by the banks all along, and as punishment for Wall Street. I hope Wall Street will never be the same.