Saving Homes and Free Markets: A Simple Proposal

Both the Obama administration and the Republicans have housing blood on their hands. Obama was silent as Democrats and Republicans in 2009 defeated Senator Dick Durbin’s( D-IL) bankruptcy reform bill that would have stopped the foreclosure tidal wave.

One simple change in federal law would save millions of families from losing their homes, cost tax payers nothing, discourage banks from making crazy mortgage loans, put people back to work, and restore self-discipline to both lenders and borrowers in the free market. This change is absolutely nothing new, just a return to the way federal law was until 1979. In fact, it’s the way all business, except for residential mortgages, still function every day.

Simply restore the right of bankruptcy judges under the U.S. bankruptcy code to adjust residential mortgages in light of market reality in a meeting with debt-holders. This will save homes, let homeowners pay mortgages, and return sanity to housing markets. The reality principle would encourage lenders to renegotiate loans on the basis of current prices and mortgage rates, and avoid foreclosure and bankruptcy filings.

The 1979 changes in bankruptcy court law, and the deregulation of financial derivatives set the stage for the housing market bubble and the global financial meltdown. Underwriting standards were thrown out the window. No assets, no income, interest only mortgages; and mortgage backed securities spouted like mushrooms.

The reality principle will push lenders to make loans on the basis of real underwriting principles, not fast buck schemes. By using an equity kicker as part of renegotiation, the lender could get a share on future increases in home value after a sale, and allow homeowners to keep their homes through terms that lessen likelihood of re-default.

Now is the time for the Obama administration and the new Republican House majority to get together to end the flood of foreclosed homes driving down housing prices, stopping new home construction, and prolonging the Great Recession. It’s time for politicians to “put up” and help fix the housing mess, or “shut up” and go on caring more about banks and financial speculators.

We Need to Call for a Housing March on Washington!

To hold Washington’s feet to the fire, to demand common sense reforms that will keep millions in their homes and put millions to work, it’s time to organize a housing march on Washington.

It’s time for housing advocates, for reform advocates, for John Stewart and Steven Colbert, for the Tea Party, for progressives, for home builders and unions, for all who value homes, jobs, and a fair shake in free markets to come together, on this point alone, to march on Washington this spring to demand common sense housing reform, to restore the power of bankruptcy courts to address home mortgages.

Not a left-wing idea or a right-wing idea

This isn’t a left-wing idea or a right-wing idea. It’s an idea behind which Americans can come together. We can get to the heart of the matter, the housing crisis, by a simple change in bankruptcy law. It’s the speculators, the scammers, and the get rich quick big money guys that profit when Americans are kept at each other’s throats.

To fix the housing market, create millions of jobs, and save millions of homes we don’t need to spend more, or cut more. We just need to come together and demand the politicians put economic reality with checks and balances back into the housing market through restoration of the bankruptcy law.

I suggest Saturday April 4, 2011 for people to gather on the National Mall for this common sense solution.

Roy Morrison
Roy Morrison is Director of the Office for Sustainability at Southern New Hampshire University. Contact Roy at NewsBlaze.