Posted on Tue, Sep. 23, 2008
last updated: November 24, 2010 01:49:36 PM
WASHINGTON — The push for greater consumer protections in the pending Wall Street bailout bill intensified Tuesday as a host of advocacy groups called on Congress to include more help for American families in the legislation.
As negotiations between the White House and congressional leaders intensify, Democrats are asking the Treasury to require banks to modify mortgage terms for the some 6.5 million homeowners who are or will be at risk of foreclosure in the next few years.
However, those requests, along with calls for executive-compensation limits, more oversight and protections for taxpayers, could jeopardize quick passage of the legislation, which the White House is seeking by Friday.
A backlash is growing against the Bush administration's rescue plan from groups including the AARP, the Leadership Conference on Civil Rights and Americans for Legal Immigration Political Action Committee. Each has raised questions about the proposal's cost, risk and lack of support for struggling families.
"Any Wall Street bailout must include help for Main Street so that millions of Americans aren't faced with losing their homes and aren't foreclosed out of their American dream," said Nancy Zirkin, the executive vice president of the Leadership Conference.
Outside the Treasury Building, next door to the White House, on Tuesday about 20 protesters from Acorn, a national advocacy group for low-income Americans, carried signs that read, "Help for Main Street, not just Wall Street."
Martin Eakes, a director of the Center for Responsible Lending in Durham, N.C., called for provisions that permit struggling homeowners to restructure their loans in bankruptcy court without declaring full bankruptcy. A bailout package without such provisions would simply not stabilize the economy, Eakes said.
"Targeted court-supervised restructuring of their loans as an absolute last resort will prove to be the only direct benefit to the middle class in the $700 billion bailout program." Eakes said.
The AARP estimates that some 634,000 older Americans are facing foreclosure, while another 50,000 are in foreclosure proceedings or already have lost their homes. Dean Sagar, a lobbyist for AARP, said it's a misconception that older homeowners aren't affected by the mortgage and financial crisis because they've been in their homes for years.
Because of their ages and the fact that many have fixed incomes, Sagar said it's nearly impossible for these people to recover from their losses or to ride out the crisis and wait for property values to rise again. In a letter to congressional leaders earlier this week, the AARP called for bankruptcy protections in the bailout bill.
"AARP strongly supports adding the bankruptcy provisions to the current financial rescue proposal," Sagar said. "It's got to be done."
Industry lobbyists have said the proposal is unnecessary because once the government buys the troubled mortgage securities, it has the authority to change the loan terms and make the loans affordable.
The bankruptcy provision would be an immediate help to homeowners such as Candace Weaver, an 8th grade teacher in Wilmington, N.C.
In December 2005, Weaver and her husband refinanced their home loan to pay some bills while her husband recovered from a heart attack. They got an adjustable-rate mortgage with an 8.8 percent interest rate, but they didn't realize it would jump to 15.8 percent or that it required a balloon payment — a larger monthly installment — after 30 years.
A few months after refinancing, Weaver was diagnosed with kidney cancer. She put off surgery until June 2006, and then sought a one-month deferral on her July mortgage payment until their finances stabilized.
But Weaver said the mortgage company, BNC Mortgage Inc., denied the request, saying it couldn't help her until the loan was in default.
"When I called back, they treated me like a criminal." Weaver said. She said the company denied her request for a repayment plan until foreclosure action began on the home in late 2006. "Only then did they give me a very expensive repayment plan that was absolutely impossible for me to pay," Weaver said.
To stop the foreclosure, Weaver said she agreed to the repayment plan and paid a mortgage-servicing company, America's Servicing Co., more than $7,000 over six weeks. After she missed payments, foreclosure proceedings started again. Weaver has since hired an attorney to fight for her home. She said she wishes she could've restructured her loan in bankruptcy court.
"I didn't do anything wrong. I didn't ask to have cancer," Weaver said. "I understand that the bailout has to happen, but unless something is done to help struggling homeowners, people like me who were left out, we're the victims. And that's just not fair.
"The government needs to remember that people like me who pay taxes and who work hard every day, all we want is to get up and go to work, contribute to our community and keep our homes. Please help us," she said.
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