After several days of intense planning, discussions and negotiations, several Progressive members of Congress and their grass-roots allies are close to announcing a Rescue Package For America's Homeowners.
The best part of this package is that it punishes those that knowingly tried to game the system, while rescuing only innocent homebuyers that were huckstered by Wall Street Greed. And did I mention that it costs the American Taxpayer nothing - yup! zippo.
There are 5 Key Steps to this Rescue Package that deliberately parallel the brilliant "No Bailouts Act" from Pete DeFazio, Donna Edwards and Marcy Kaptur, among others, released earlier today.
DRAFT
No LOCKOUTS Act
Bringing Accounting, Increased Valuations, Oversight and Eliminating Foreclosures
1. Require the Federal Housing Authority (FHA) to require an standard model to value the worth of individual homes.
This bill will require FHA to implement a rule to supersede any requirements for independent assessment of single-family and multi-family dwellings, which value properties based on the market value of comparable dwellings, no matter the conditions of the market. When no meaningful market exists, as is the current market for homes in many neighborhoods, this standard requires institutions to value assets at fire-sale prices. This creates a loss on paper depressing the economic mood of the nation. Using the FHA standard model will immediately cause home values to appreciate, resulting in an appreciable improvement in consumer sentiment.
2. Require the Federal Housing Authority to restrict model-shorting.
This bill will require FHA to implement a rule forbidding homeowners from selling homes at prices below the FHA model valuation. Such practices many times harm the homeowner in the sales, reduce faith in the FHA model and hurt efforts to restore confidence in the economy. There is no economic value produced by sales of homes at loss, but significant negative effects.
3. Require Exceptional Home Re-modeling Authority to Prevent Foreclosures.
This bill will permit home-owners to re-model their home valuation in accordance with their ability to pay their mortgages. Banks and other mortgage owners will be required to acknowledge the re-modeled valuation till January 17th, 2010, but may appeal to a Federal court thereafter. This rule prevents housing market crashes brought on by irrational short term market behavior, supply excesses and homelessness.
4. "Net Worth Certificate Program"
This bill will require Fannie Mae and Freddie Mac to implement a net worth certificate program. The GSEs would determine home-owners with short-term capital needs and the ability to financially recover in the foreseeable future. For those entities that qualify, the GSEs should purchase net worth certificates in these individuals. In exchange, these individuals issue promissory notes to repay the GSE. This exchange provides short term capital, with not cash outlay. Interest rates on the certificates and the GSE notes should be identical so no subsidy is necessary.
Participating individuals must be subject to strict oversight by the GSE including monitoring of key personal metrics including employment, preventative health checkups and financial planning.
In 1982, Congress approved a program, known as the Net Worth Certificate Program, that allowed banks and thrifts to apply for immediate capital assistance. From 1982 to 1993, banks with total assets of $40 billion participated in the program. The majority of these banks, 75%, required no further assistance beyond the certificate program. There is no reason this cannot save America's homeowners as well.
5. Double Homes' Insured Values
The bill will require an increase in the insured values of dwellings to provide Americans confidence that their home values are "as safe as houses" and help eliminate panicked fire-sales of houses and condos.
Not sure how much we can trust this blog that initially broke this story, but it appears this to be a work in progress. I'll keep this story updated as it evolves.
Snark Alert
Ok, this diary is snark. Not because I don't believe in Progressives rescuing the economy, but because I believe that the "No Bailout Act" is just phony populism that promises to fix complex problems for free. Just like your home cannot be worth more because a Government Bureau assessed it higher, neither can a Bank!
So here's to hoping for a reality based Progressive plan that will recapitalize banks and prevent foreclosures.