Sen. Hillary Clinton today proposed a number of steps to mitigate rising foreclosures. The plan was attacked by her Democratic rival over contributions she has accepted from mortgage industry lobbyists.
Clinton today focused on how the credit crisis has disproportionately impacted blacks. Citing statistics from consumer groups, she said her plan -- which calls for a 90-day foreclosure moratorium, a five-year rate freeze on subprime mortgages and a $30 billion fund for communities to buy foreclosed properties -- is a sensible way for lenders, investors and borrowers to stabilize the economy, according to statements posted on her campaign Web site today.
In addition, the New York senator proposed a four-part plan today that includes restructuring mortgages where the loan balance exceeds the property value, according to her campaign. Either the Federal Housing Administration or another government entity "stand ready to purchase, restructure, and resell underwater mortgages if a private-sector auction does not achieve the type of broad-based restructuring our housing market needs."
Clinton is also calling for an emergency working group on foreclosures to come up with a plan over the next three weeks to deal with mounting foreclosures. She proposes that the group be headed "by a non-partisan group of eminent leaders like Alan Greenspan, Paul Volcker and Bob Rubin -- each of whom supports one of the remaining candidates in the Presidential race."
Clinton said she plans to introduce legislation that would protect mortgage servicers from investor liability if they modify loans.
But Sen. Barack Obama, Clinton's rival for the Democratic presidential nomination, said her history of accepting campaign contributions from political action committees tied to mortgage bankers makes him better qualified to deal with the credit crunch, according to an announcement today.
"Her history of accepting campaign contributions from PACs and lobbyists representing that same industry shows that she's enmeshed in the very system that needs to change," the announcement stated. "Senator Obama does not accept PAC or federal lobbyist money and has pledged to sign the most sweeping ethics reform in history, finally getting tough on the special interests."
The announcement went on to detail contributions to Clinton including $56,250 so far from finance industry PACs, $11,750 from four Countrywide Financial Corp. lobbyists and $10,200 from three Washington Mutual Inc. lobbyists. Obama also itemized a number of other contributions from PACs from outside the industry.
Obama went on to say he proposed his own emergency working group one year ago in a letter to Federal Reserve Chairman Ben Bernanke.
Among other ideas the Illinois senator has proposed are: allowing bankruptcy judges to modify mortgages, creating a borrower fund from increased penalties to mortgage lenders and boosting resources for mortgage fraud prevention.
Republican rival Sen. John McCain recently warned that government intervention in mortgage contract terms would negatively impact credit availability.
"I'm also worried about the investor class," he said in a video interview with the Wall Street Journal. "If government changes terms of a contract, then what is going to be their motivation in the future to be involved in that kind of investment?"