"Hundreds of Thousands of Foreclosures Will Be Prevented; Further

Reform Needed To Cover Millions Left Out and Prevent Abuse By Private

Lenders"



    WASHINGTON, July 30 /EMWNews/ -- Today President Bush

signed what has been called the most important piece of housing legislation

in years. With the enactment of the Housing and Economic Recovery Act,

Washington has extended a lifeline of help to homeowners caught in

dangerous and deceptive mortgages. In response, Miles Rapoport, President

of the national public policy center Demos, which has extensively studied

the American credit and home lending crisis, issued the following statement

praising the protections of the new bill, but warning that it doesn't go

far enough to prevent foreclosures or industry abuses.



    "This rescue bill couldn't have come too soon, and it outlines several

immediate steps that will address some of the most pressing issues of the

current mortgage crisis. In one key provision, the Federal Housing

Administration (FHA) will insure new fixed-rate loans for an estimated

400,000 families who would otherwise almost certainly lose their homes to

foreclosure. The legislation also improves mortgage disclosure; creates an

affordable housing trust fund; allocates $3.9 billion in grants for local

damage-containment efforts; and authorizes the Treasury Department to

extend emergency financial assistance to the imperiled housing finance

giants Fannie Mae and Freddie Mac.



    "But this is no panacea. The measure includes questionable tax credits

and has serious deficiencies:



    -- Homeowners cannot get help unless lenders or loan servicers

voluntarily agree to a reduced loan balance



    -- The FHA rescue program contains no mechanism for dealing with

multiple-lien situations



    -- The Fannie Mae and Freddie Mac provisions seem to set a precedent of

letting private managers milk these government-supported entities for

personal profit in good times, at no cost in bad times



    -- The $3.9 billion in grants pales alongside the economic damage to

hard-hit states and localities, where the foreclosure crisis has brought a

double-whammy of increased costs and reduced tax revenues



    "In its newly-issued report, 'Beyond the Mortgage Meltdown: Addressing

the Emergency / Averting a Future Catastrophe,' Demos proposes additional

short- and long-term steps, including:



    -- Concerted follow-up efforts to overcome the recalcitrance of lenders

and loan servicers



    -- Liberalization of bankruptcy rules to allow court-supervised

negotiations over home mortgages, as the law already permits with loans

secured by yachts or vacation properties



    -- Legal liability for securities packagers and investors when loans

are deceptive



    -- A supplementary direct-loan program along the lines suggested by

Federal Deposit Insurance Company chair Sheila Bair



    -- More help for renters caught in landlord foreclosure situations



    -- A regulatory regime that covers mortgage brokers, mortgage

securitizers, and other parties who have been effectively unregulated until

now



    -- A single mortgage watchdog agency with a clear commitment to the

public interest



    "Despite its gaps, the Housing and Economic Recovery Act is an

important measure in its own right and could mark an important turning

point in the debate over economic policy. Since the 1980s, an influential

camp of economists and policymakers has sought to portray government as the

enemy of a strong economy. The mortgage meltdown has awakened a new

recognition of the need for regulation and public infrastructure--not only

to protect consumers against deceptive practices, but to protect the

economy and the society against the boom-and-bust swings of the financial

markets.



    "In the words of Demos' new report: 'The mortgage industry, with all

its recent troubles, has placed two large projects on the public policy

agenda. One is rescue and damage control. The other is the construction of

new rules to prevent another such disaster. Mistakes will surely be made in

both these enterprises, but history joins common sense in suggesting that

the long-term results will be positive for lenders, borrowers and the

nation as a whole.'"



    The "Beyond the Mortgage Meltdown" report and extensive research on the

lending industry and American household finances can be downloaded at

http://www.demos.org.







    For more information, or to schedule an interview with Miles Rapoport

or "Beyond the Mortgage Meltdown" author James Lardner, please contact Tim

Rusch at trusch@demos.org or (212) 389-1407.