Hillary called on Wall Street and the mortgage industry to voluntarily agree to a moratorium on foreclosures; a freeze in monthly mortgage rates; and regular updates on the industry’s progress in modifying loans:

• Observe a foreclosure moratorium of at least 90 days on subprime, owner-occupied homes. The moratorium will stop foreclosures until lenders and servicers have an opportunity to implement the freeze in mortgage rates. The moratorium will also give state and city organizations as well as community groups the necessary time to provide financial counseling to at-risk homeowners.
• Freeze the monthly rate on subprime adjustable rate mortgages, with the freeze lasting at least 5 years or until the mortgages have been converted into affordable, fixed-rate loans. After the moratorium, there should be a long freeze in rates on adjustable rate mortgages. The overwhelming majority of subprime mortgages have adjustable rates. The long rate freeze will give the housing market time to stabilize. It will give families an opportunity to rebuild equity in their homes. It also gives the mortgage industry time, and incentive, to convert mortgages that were designed to fail into loans that are actually affordable. The rate freeze and loan modification must be extended not only to borrowers who are current but to some who have fallen behind. After all, it is indisputable that brokers and mortgage companies lured families into mortgages that were designed to end in foreclosure. This was only possible because regulators were asleep at the switch. A rate freeze is critical. An average of $30 billion in loans will reset monthly next year. One study indicates that the average reset increases monthly payments by 40%. It is no surprise that rate-resets are the major driver of the foreclosure crisis.

• Provide status reports on the number of mortgages being modified. Resolution of the foreclosure crisis will require that large numbers of unworkable mortgages be converted to stable loans. To date, however, despite pressure from Congress and the press, lenders and servicers have modified only about 1% of subprime mortgages. This obviously has to change. We cannot take the industry at its words that it will follow through on an agreement to convert loans expeditiously. Accordingly, the agreement must impose on lenders and servicers an obligation to regularly report their loan modifications.

If Wall Street does not voluntarily agree to the three-step plan, and the crisis builds, Hillary will consider legislation that offers protection to mortgage servicers and others who work with borrowers to modify their mortgages. Servicers and others who administer the mortgages can save families’ homes, save investors from losses down the road, and help the economy. However, many servicers are concerned about opening themselves to lawsuits from the investors who actually own the loans. Hillary is prepared to consider giving legal protection to servicers and others who administer mortgages when they do the right thing by balancing the interests of the homeowners, the investors, and our economy.

Americans are anxious about more than the housing crisis. They are worried about an economy that is producing stagnant wages for middle class families. Productivity has risen 18 percent in six years, yet wages have stayed flat, and family incomes have fallen by nearly $1,000. Addressing our housing crisis is only one component of Hillary’s broader agenda to restore shared prosperity for America’s middle class. For seven years, middle-class families have been struggling with declining incomes and skyrocketing costs. Hillary Clinton has proposed a package of middle class tax cuts to help families realize the American Dream by rewarding work, making college affordable, ensuring healthcare is affordable, and encouraging savings and wealth creation. As President, she will:

• Offer generous tax credits to help families afford health care, including a premium affordability cap to ensure that no family pays more than a reasonable share of their income on healthcare. These tax credits are part of Hillary’s American Health Choices Plan to provide quality affordable healthcare to all Americans.
• More than double the HOPE tax credit to make college affordable for middle class families. Hillary will raise the maximum benefit amount for students and their families from $1,650 to $3,500. This new credit will cover more than 50% of the typical cost of public colleges and universities and more than the full cost of tuition for community colleges.
• Provide up to $1,000 in matching tax cuts to help families save and invest for the future. Hillary’s American Retirement Accounts plan will offer all Americans a new opportunity to save and build wealth with a generous matching 401(k) plan. Under her plan, couples making up to $60,000 will receive a dollar-for-dollar matching tax credit on the first $1000 they save, and couples making up to $100,000 will receive a fifty percent match on their first $1000 in savings.
• Expand the Earned Income Tax Credit to make work pay for working Americans. Hillary will triple the size of the EITC benefit for single workers, providing more than 4 million people a pro-work tax cut averaging $750.
• Increase tax benefits for child care by reforming the Child and Dependent Care Tax Credit.

 

Immediate Assistance To Help Struggling Families:

In the face of growing economic anxiety, Hillary believes we should also begin implementing fast acting, short term stimulus measures to help those hardworking families that are hit hard by the economic downturn. Supporting these families is the right thing to do. And because these families are most likely to spend any assistance immediately, it is also the best way to jump start our economy.

Today, Hillary outlined two initial steps to help struggling families. She stands ready to take further steps if the economic situation continues to deteriorate. Those steps are:

§ A one-time Community Support Fund of up to $5 billion to help hard-hit communities and distressed homeowners weather the foreclosure crisis. Foreclosure prevention is more critical than ever. The concentration of foreclosures in particular neighborhoods has a negative ripple effect on communities, leading to higher rates of crime, lower tax revenues, and lower property values. Risky subprime loans are three times more likely in low-income neighborhoods than in high-income ones. Minority communities are also disproportionately at risk because subprime loans are five times more likely in predominantly black neighborhoods than in predominantly white neighborhoods. The Center for Responsible Lending estimates that 55% of African-Americans and 46% of Latinos who purchased homes in 2005 received subprime mortgages.

The fund will support initiatives by states, cities, and community groups to reduce foreclosures, and to help cities cope with the financial and social costs associated with an increase in vacant properties. The fund will provide a much-needed boost to communities already feeling the effects of the economic downturn. States are already piloting programs to stem foreclosures. Many of the programs provide financial counseling to at-risk homeowners, help borrowers work out solutions with lenders, and educate homeowners about predatory lending. Studies demonstrate that the overwhelming majority of families that receive financial counseling ultimately avoid foreclosures. Financial counseling can cost as little as $3,000 per household, while each foreclosure costs a local community $227,000 when the harm to surrounding property values is included.

§ A $2 billion emergency investment in energy assistance for families in cold weather states: Hillary called for committing an additional $1 billion in emergency home heating funds to ensure that millions of seniors and low income families are not left literally out in the cold this winter. She also called for a $1 billion emergency home weatherization program to help 3 million families lower their heating bills by as much as 20%. These measures are particularly important for senior citizens who live on fixed incomes (25% of seniors rely on Social Security as their sole source of income). Because Social Security’s cost of living adjustment does not take into account regional energy prices, a number of seniors could be forced to cut back on key items like prescription drugs and food without additional assistance.