The housing plan announced today represents a huge step forward for the entire country, and includes responsible and effective actions to reduce the massive foreclosures that triggered today's economic crisis. It represents an essential and overdue investment in correcting the results of bad lending and poor risk management. And it will benefit households from across the economic spectrum, providing new hope for a future with stronger communities and a stronger economy.
Previous actions to bail out banks have been necessary to keep the economy afloat, but essentially amounted to bailing out the water in a leaky ship. By addressing the foreclosure crisis directly, the Administration's housing plan finally begins to plug the holes that cause the problem.
This plan also recognizes that voluntary actions to avert foreclosures without real government action simply have not worked. With this plan in place, there will be more options and incentives for servicers and investors to avoid foreclosures that don't need to happen. That will help families at risk, and it also will help the entire economy by stabilizing the housing market and preventing billions of dollars in spillover effects that occur when the market is weak.
An essential part of the plan permits distressed homeowners to seek loan modifications in bankruptcy court, an option now permitted on other types of loans that are far less important to families and the economy. This provision will provide a new avenue for reducing hundreds of thousands of foreclosures without requiring any tax dollars. Equally important, it will provide stronger incentives for loan servicers to offer effective loan modifications outside of court. Allowing homeowners access to the courts means that voluntary private efforts to prevent foreclosures will work better—and, in doing so, will benefit the entire economy. And paired with the comprehensive and well-thought-out modification plan, many fewer families will need to take this course.
We urge Congress to recognize the urgency of the foreclosure epidemic and to act immediately to implement the legislative parts of this plan without watering them down. Fast action is essential. While debate goes on, a new foreclosure occurs every 13 seconds. To see a constantly updated count of new foreclosures since January 1 this year, go to www.responsiblelending.org.