Communities Prepare for Impact of Housing Bill
MICHEL MARTIN, host: Now we're going to go to consumer advocate Bruce Marks. He's CEO of the Neighborhood Assistance Corporation of America, which has been helping homeowners nationwide to renegotiate their loans, trying to avoid foreclosure. Bruce, welcome. Thanks for talking to us.
Mr. BRUCE MARKS (CEO, Neighborhood Assistance Corporation of America): Michel, thank you.
MARTIN: Bruce, what's your overall assessment of the bill? Do you think this is going to help?
Mr. MARKS: It will do absolutely nothing, Michel. I mean, look at it. It's around refinancing, and when you refinance you have to meet three criteria, and it virtually eliminates every one because either - either someone's credit score is too low, the value of the property is too low, or their debt-to-income ratios are too high. And then if one qualifies through that, then a second mortgage holder has to forgive their debt.
But even more outrageous than that case, Michel, this thing - and they know this in Congress, in the administration - it cannot even be implemented by HUD. HUD is actually saying to people, this cannot go into effect until the middle of next year. So here you have Bonnie Frank(ph), Senator Dodd, the administration, everybody knows that this will not be administered to next year, so it's a fraud out there. It will help virtually not one homeowner out there save their home.
MARTIN: Is it a timing problem? Is it a matter of the time? It just takes too long to implement?
Mr. MARKS: Well, that - that's one aspect, and you know - you know what's outrageous is that we had the - that the person who would be administrating, Brian Montgomery, head of FHA, he has told everybody it cannot be implemented to next year. You have Steven Preston, the head of HUD, he has told everybody it cannot be implemented until next year.
MARTIN: Why is that? Just because it takes too long to get it up and running, to ramp up something of this size?
Mr. MARKS: Absolutely. They've never done it before. There is - the risk management. HUD already has 200 vacancies out there that haven't been filled. They can't handle it. But what's worse than that whole piece, Michel, is that this is really a backdoor way to bail out Fannie and Freddie for their predatory and subprime lending activities.
I actually testified in Congress eight years ago on September 12th of 2000 saying they should be prevented from going into the subprime lending market, and if they did, then the taxpayers would bail them out. Now what's happening, Michel, is that we have - we had an implicit taxpayer support of Fannie and Freddie of 10 billion dollars. That has now been unlimited. It's been changed to an unlimited taxpayer bailout. That could exceed 800 billion or maybe even a trillion dollars of taxpayer money to bail out Fannie and Freddie for their engagement of predatory lending activities.
MARTIN: Let me ask you about one other provision in the bill. One provision calls for about 4 billion dollars in grants to - is it local governments or community organizations working through local governments, to buy and refurbish foreclosed homes? Now, the president specifically expressed concern about this provision, saying he thinks it would actually encourage lenders to foreclose because that they're going to get money from these organizations. Do you think that that's a fair criticism? Was he right about that?
Mr. MARKS: Well, you know, I think what a fair criticism across the board is, this is a bailout for the lenders and the investors who engage in predatory lending activities, knew it, they made billions and billions of dollars, and now we're bailing them out through buying their REO properties...
MARTIN: But wouldn't your organization be one of those that would benefit from this provision?
Mr. MARKS: Oh, sure, sure. We would actually benefit, but it's not about whether NACA is going to benefit or whether the funds of organization. It all has to focus on helping the homeowner.
MARTIN: But you still think it's the wrong provision? You still think it offers the wrong incentives?
Mr. MARKS: I think the whole bill is a fraud. They couldn't - it provides political cover to bail out Fannie Mae and Freddie Mac. They've wanted to extend that 10-billion-dollar guarantee, now they've already succeeded in doing that. They're putting together a facade that says they're going to help the homeowners, when, in fact, they're going to help virtually no homeowners out there. And look...
MARTIN: Well, one argument is - one argument is that it'll help stabilize the credit markets by helping investors regain some confidence, and even if you find that objectionable and kind of morally questionable, the moral hazard, you know, is the term that's being used, that some argue that that's kind of a hold your nose situation, and it just has to happen because you have to restore confidence in these credit markets somehow. Do you think that's a fair point?
Mr. MARKS: No, I don't, because there's one reason why we have a problem in the credit markets, and that's because of foreclosures. If you stop the foreclosures and you restructure mortgages to keep people in their homes, even if that means reducing their interest rates to five, four, and three percent fix for the main term, what does that do? That stops the foreclosures of millions of hardworking Americans.
When you stop the foreclosures and the homeowners stop - start to make their mortgage payments, what does that do? That supports the RE capital markets. If you do it from Main Street and you build up home ownership, that will help everybody. We have to be around that to have this idea that the moral hazard - what about these investors? That's the moral hazard. We're supporting the investors who engaged in predatory lending activity - what...
MARTIN: What about the argument - I understand what you're saying. What about the argument that some Republicans made in arguing against this bill that it actually bails out everybody who made bad decisions? It bails out homeowners who were irresponsible, who signed things they didn't understand, or who actually presented incomplete or income information that they knew was false, and it also bails out people on the other side who engaged in these contracts. It's a bailout, and it's bad for the economy, it's bad for everybody. What do you make about that argument?
Mr. MARKS: You cannot blame the homeowners. I mean, we're talking about when the largest financial institutions in the country and the world, the most prestigious, the GMACs, the Wells Fargo's, the Washington Mutual's, the Countrywide's. They said to people, you can live in a community where your children will be safe, where you don't have to be afraid of their safety, where you can have them go to good schools, and you can have a home you that you can never even imagine.
And these companies said, you know, you can refinance in two years, don't worry. So of course people are going to take that opportunity. You can't blame the homeowners. We're talking about owner occupants...
MARTIN: Why aren't they equally responsible? Very quickly, Mr. Marks, why aren't homeowners equally responsible? I understand your point you've made, your point about predatory lending. You're saying these companies pushed these loans on people, but what about the people who took them knowing they couldn't afford it?
Mr. MARKS: Because we have laws in this country and the regulators are nowhere to be seen. We used to have community bankers that said, yes, I understand that you want a 300,000 dollar mortgage, but you can only afford a 200,000. We had the most prestigious companies in the world. Not the loan sharks on the corner saying, if you don't make your payments we're going to break your legs. Saying, OK, yes, you want a 300,000 dollar mortgage, but I'll give you one for 400,000 because you can get all kinds of fees.
MARTIN: Well, thank you so much for sharing your thoughts with us. Bruce Marks is CEO of the Neighborhood Assistance Corporation of America. He joined us from Boston. Thank you so much.
Mr. MARKS: Thank you.