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GOP Senator Floats Last-gasp Home Rescue Scheme

Created: On November 6, 2007 @ 2:36 pm In

By Jim Perez,
DebtHelp, Inc. Staff Writer

U.S. Sen. Norm [1] Coleman,of Minnesota, is floating a plan to help homeowners who are facing foreclosure.

Called the [2] HomeOwners Mortgage Emergency Act, the Republican’s [3] Ponzi scheme would allowhomeowners to withdraw up to $100,000 from their retirement accounts withoutpaying any penalties or taxes. They could use the money to pay any latepayments and fines.

At first blush, the proposal sounds good.

If you’re sinking I guess any flotation device lookspromising.

But reading between the lines, the flotation device mayactually be the rock that drags a homeowner down for the third time.

Borrowers would have to repay the money back in three yearsor have a tax lien placed on their home for the taxes and withdrawal penaltiesthat were initially set aside.
One of the other factors not mentioned is that many familiesfacing foreclosure secured those homes with subprime loans.

According to the [4] CongressionalBudget Office, most of those families may not actually have those retirementaccounts from which Coleman is so graciously allowing them to draw.

The CBO found that only 42 percent of people earning between$40,000 and $80,000 contribute to a 401(k), and just 10 percent contribute toIRAs. For those earning below $40,000 a year, the percentages are even lower.

These are the very families the subprime lenders preyed, Imean focused on.

If these families had the means to save in the first place,they would not be facing foreclosure now.

Of course Coleman’s plan doesn’t hold mortgage lendersaccountable for bad behavior.

The late [5] Edward Gramlich, a [6] Federal Reserve official, wrote that”the subprime market was the Wild West. Over half the mortgage loans weremade by independent lenders without any federal supervision.”

Coleman doesn’t want a government bailout of homeowners.Rather, he wants the government to allow the banks to be able to raid the 401(k)sof homeowners, which they cannot currently do in the case of a bankruptcy.

If a homeowner declares bankruptcy, as many in foreclosure arelikely considering, retirement accounts are off limits.

Coleman’s scheme is a way for banks to strip every lastasset from homeowners before taking their house.

And as most politicians are so willing to do, Coleman isdancing with those who brought him tothe dance: According to the [7] Centerfor Responsive Politics, as of June 2007, Coleman had received campaigncontributions totaling $1,069,649 from the securities and investment, realestate and commercial bank sectors.

I won’t even mention that retirement accounts – for thosewho do have them – should be left for retirement.

Of course, if Coleman and the rest of the GOP cabal havetheir way, the middle class won’t retire: We’ll all be working at Wal-Mart tosupplement our privatized Social Security that they invested in hedge funds forus.

Article printed from DebtHelp.com Blog: http://www.debthelp.com/blog

URL to article: http://www.debthelp.com/blog/2007/11/06/gop-senator-floats-last-gasp-home-rescue-scheme/

URLs in this post:
[1] Coleman: http://coleman.senate.gov/
[2] HomeOwners Mortgage Emergency Act: http://coleman.senate.gov/index.cfm?FuseAction=Articles.Detail&Article_id=233
[3] Ponzi: http://en.wikipedia.org/wiki/Ponzi_scheme
[4] CongressionalBudget Office: http://www.cbo.gov/
[5] Edward Gramlich: http://en.wikipedia.org/wiki/Edward_Gramlich
[6] Federal Reserve: http://www.federalreserve.gov/
[7] Centerfor Responsive Politics: http://www.opensecrets.org/politicians/indus.asp?CID=N00013870&cycle=2006