Written By: Alan S. Wolf Published in Spring USFN Report 2009
On March 6, 2009, the Congressional Oversight Panel released its oversight report, “The Foreclosure Crisis: Working Toward a Solution.” The panel was created to oversee the expenditure of the Troubled Asset Relief Program (TARP) funds authorized by Congress in the Emergency Economic Stabilization Act of 2008 (EESA) and to provide recommendations on regulatory reform. The panel is chaired by Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School. Panel members are: Congressman Jeb Hensarling (R-TX); Richard Neiman, Superintendent of Banks for the State of New York; Damon Silvers, Associate General Counsel of the AFL-CIO; and former U.S. Senator John Sununu.
One note of concern regards the predisposition of the chairperson. For many years, she has been a vocal consumer advocate in the bankruptcy realm and a “thorn in the side” of the mortgage industry. Consistent with the chairperson’s prior actions, the panel’s report leans heavily in support of bankruptcy cramdown legislation.
The report examines the causes of the foreclosure crisis and the impediments to its resolution and develops a checklist providing a roadmap for foreclosure mitigation success. It concluded that any successful program to bring the crisis to an end must address the following issues:
1. Will the plan result in loan modifications that create affordable monthly payments?
2. Does the plan deal with negative equity?
3. Does the plan address junior mortgages?
4. Does the plan overcome obstacles in existing pooling and servicing agreements that may prevent modifications?
5. Does the plan counteract mortgage servicer incentives to not engage in modifications?
6. Does the plan provide adequate outreach to homeowners?
7. Can the plan be scaled up quickly to deal with millions of mortgages?
8. Will the plan have widespread participation by lenders and servicers?
The report also includes an initial assessment of President Obama’s Homeowner Affordability and Stability Plan, and outlines the extent to which it addresses many of the impediments identified in the report.
The full report can be found here. The panel held a companion hearing to this report in Prince George’s County, Maryland. The materials from that hearing are on the panel’s website, which is linked here. Also on the panel’s website is the April oversight report, Assessing Treasury’s Strategy: Six Months of TARP, which was released on April 7, 2009.