How are subprime mortgage lenders getting into the holiday spirit this year? By foreclosing on the homes of working families while doling out a whopping $38 billion in bonuses to wealthy executives.
This holiday season, more than 2 million American families face possible home foreclosure as a result of the subprime mortgage crisis. Meanwhile, the same CEOs and executives who drove the nation into this mess are being rewarded to the tune of billions of dollars.
As heartbreaking as the mortgage crisis is on a personal level, its long-term impact on the lives of all Americans and our economy runs deep. Mortgage lenders typically lose money on foreclosures, according to data from the U.S. Department of Housing and Urban Development. Foreclosures threaten the solvency of financial institutions and make our whole economy shakier at a time we can least afford it.
Meanwhile, there’s a party on Wall Street. The giant financial firms that brought us this crisis are handing out billions in bonuses to their bankers in a classic example of pay for failure.
In a letter to the nation’s top subprime mortgage lenders, the AFL-CIO called for an immediate one-year moratorium on subprime mortgage foreclosures to give homeowners a fair chance to escape the subprime net, refinance and restructure.
A moratorium is a first step. Next the mortgage industry and government must create a structured program providing for the replacement of teaser rate loans — so-called 2 and 28 loans — with conventional 30-year mortgages at the teaser rate.
Servicers must renounce those agreements that reward mortgage companies for foreclosing on homes rather than encourage refinancing or other workout strategies. And servicers must commit to publicly reporting details about their subprime activity.
Finally, we need massive outreach under federal government auspices to subprime borrowers to let them know how they can keep their homes. These are the initial steps necessary to stabilize our housing markets, prevent cascading defaults and safeguard our economy.
It’s time for immediate, responsible action to address this growing threat to working families. In the classic Dr. Seuss tale, the Grinch, buoyed by the holiday spirit, did the right thing for the residents of Whoville in the end. But life is no fairy tale. If subprime lenders don’t act to address this crisis, then Congress must step in to save working families and our economy from the subprime Grinch.