Look at the polls. Better yet, talk to a friend, neighbor, or family member and it’s crystal clear that Americans are worried about jobs, foreclosures and the ever-widening wealth and income gap. Instead of solutions, what we’re getting from D.C. are cuts to the earned benefits of seniors, firing our kids’ teachers and taking food off the tables of the hungry. That’s not a solution; it’s a recipe for disaster.
There are real solutions, and one of them creates over 1 million new jobs, keeps families in their homes and begins to stabilize the housing market and economy as a whole. Best of all, this solution doesn’t ask those struggling the most to pay again. This solution tells those who caused the mess in the first place to begin to pay for the cleanup.
This solution is outlined in the report released this month by the New Bottom Line entitled, "The Win-Win Solution: How Fixing The Housing Crisis Will Create 1 Million Jobs". The report shows how we can fix the housing crisis and revitalize our communities and economy by making banks lower the principal balance on all underwater mortgages to current market value and refinancing these loans to current market interest rates.
Right now, 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.
The report reveals that if the banks stepped up and provided principal reduction on all underwater mortgages to current market value, we could:
- Create 1 million jobs every year — This includes over 300,000 jobs in California, the state hit hardest by the financial crisis.
- Pump over $70 billion per year back into communities– This includes $12 billion dollars per year in Florida, the second of the two states hit hardest by the foreclosure crisis.
- Save the average family over $500 per month on mortgage payment
- Solve the foreclosure crisis once and for all
As the report states, 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 principals and interest rates will effectively function as the second stimulus our nation has been desperate for and this stimulus will be paid for by those that caused the crisis. The $500 + per month injected into households will go for school supplies and groceries and other expenditures. This influx of spending will revitalize local business, spur hiring and begin to reverse our economy’s downward spiral.
"The Win/Win Solution" demonstrates 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 ($71 billion per year) in bonuses and compensation alone ($146 billion in 2010).
Other Ways To Get It Done
Right now, attorneys general from around the country are negotiating with the banks on a settlement to address the rampant fraudulent and abusive practices around robo-signing and mortgage servicing. The attorneys general have the authority and the opportunity to require real and widespread principal reduction from the banks through this settlement.
Congress can and should modify the bankruptcy laws to allow primary residence mortgages to be eligible for restructuring, including principal reduction – just as vacation homes and other debt are currently eligible.
Finally, many outstanding underwater mortgages are owned or guaranteed by we the taxpayers through the government-run entities of Fannie Mae, Freddie Mac and the Federal Housing Administration. The Obama Administration should immediately direct those agencies to start slashing principal balances and re-writing the mortgages we control. As the report states, it’s “the win/win solution.”
Who We Are and What’s Our Plan
The New Bottom Line (NBL) is an alliance of some of the nations largest faith-based and community organizing networks and leading statewide organizing groups led by the Alliance for a Just Society, the PICO National Network and National People’s Action. NBL came together as we watched our neighborhoods inundated with predatory lending, decimated by foreclosures and razed by unemployment. As we fought independently to bring justice home to our communities we realized that the game had changed; Wall Street and the big banks had a stranglehold on our economy and our government. Overcoming these forces was going to take a whole new calculus of grassroots power. Working apart we could not credibly win, but together we can. NBL represents over 1,000 community and faith based groups, all committed to fighting for a just economy that puts the needs and health of people over the convenience and profits of corporations.
To advance our goals of restructuring and re-regulating Wall Street, reclaiming our political institutions and advancing a vision of a just economy, NBL groups around the country have been moving to action. Forcing Mitt Romney to admit he thinks corporations are people, keeping pressure on state Attorneys General to come to a strong settlement with banks for their illegal activities in the foreclosure crisis, and the release of the “Win/Win Solution” are just the beginning of NBL’s strategic and offensive push coming this Fall and into next year.
We’ll soon be announcing a series of actions and events around the country that will allow everyday people to publicly express their anger about the economy and the immoral values that guide big corporations and gridlock our government. We’ll use this Fall to advance positive ideas and real solutions that to rebuild strong and vibrant communities and set the stage for the debate WE want in 2012.
Liz Ryan Murray is the Policy Director for National People’s Action. To get more information and to get involved with this campaign, go to www.newbottomline.com/join.