Homeowners, Clergy, Unions & Others Call on State Attorneys General to Demand Principal Reduction for Underwater Homeowners as Part of Settlement with Banks
(Washington, D.C.) By writing down all underwater mortgages to market value, the nation’s banks could pump $71 billion per year into the economy, create more than one million jobs annually, save families $6,500 per year on mortgage payments, and fix the housing crisis once and for all, according to a new report by The New Bottom Line, a nationwide campaign representing 1,000 faith-based and community organizations that seeks to hold Wall Street accountable and find solutions for struggling and middle-class families.
Grassroots organizations across the country aligned with The New Bottom Line campaign are calling on State Attorneys General who are investigating the banks for foreclosure fraud to stand firm for a settlement agreement that (1) includes large-scale principle reduction for underwater borrowers; and (2) does not to release the banks from claims beyond the robo-signing scandal. This would provide real restitution for homeowners and allow states to sue the banks for wrongdoing connected to the origination of mortgages and the steps leading up to foreclosure.
“Homeowners across the nation are struggling to pay their boom-era mortgages with their recession-era salaries and the economy is suffering for it. Writing down the principals and interest rates on all underwater mortgages to market value would serve as the second stimulus that America so desperately needs, only without added costs to taxpayers,” according to the report entitled “The Win/Win Solution: How Fixing the Housing Crisis Will Create One Million Jobs.”
One in five Americans owe more on their mortgage than their home is actually worth. Collectively, underwater homeowners will have to pay down $709 billion in principal before they can start building equity in their homes. Every effort to reboot the housing market to date has failed because it has not done the most essential thing: reduce the massive debt load carried by underwater homeowners.
If the banks fix what they broke and wrote down principals on all underwater mortgages to current market value, it would inject a direct cash stimulus into the economy, redirecting billions of dollars that cash-strapped homeowners are currently paying on inflated mortgage debt toward other job-creating sectors of the economy. The plan would lower homeowners’ mortgage payments by an average of more than $500 per month or $6,500 per year.
Six billion dollars per month that is currently going to mortgage payments would instead go toward buying groceries, school supplies, and other household necessities. As consumer demand picked up, businesses would start hiring again. The report estimates that putting $71 billion into American consumers’ pockets annually would help create more than one million jobs per year.
The report includes a state-by-state breakdown of how much underwater homeowners would save per month, the amount the proposal would pump into the local economy, and numbers of jobs created. For example, the plan would inject an annual stimulus of $20.5 billion in California and 300,000 jobs per year; $1.64 billion in Ohio and 24,000 jobs; and $12 billion in Florida and almost 180,000 jobs.
The report notes that the banks can afford to execute this plan. Last year, the nation’s top six banks paid out more than twice the cost of the plan ($71billion per year) in bonuses and compensation alone ($146 billion in 2010). Currently, the nation’s banks are sitting on a historically high level of cash reserves of $1.64 trillion.
The New Bottom Line is a new and growing movement fueled by a coalition of community organizations, congregations, labor unions, and individuals working together to challenge established big bank interests on behalf of struggling and middle-class communities. Together, we are working to restructure Wall Street to help American families build wealth, close the country’s growing income gap and advance a vision for how our economy can better serve the many rather than the few. Coalition members include PICO National Network, National People’s Action (NPA), Alliance for a Just Society, Alliance of Californians for Community Empowerment (ACCE), Industrial Areas Foundation of the Southeast (IAF-SE) and dozens of state and local organizations from around the country.
Source: The New Bottom Line