WASHINGTON -- Democratic presidential hopeful Hillary Clinton recently proposed a 90-day moratorium on home foreclosures to give financially troubled borrowers time to work with lenders and avoid losing their homes.
In a letter to U.S. Treasury Secretary Henry Paulson, who is trying to broker a separate White House/Treasury deal with mortgage lenders, the junior Senator from New York wrote, "It is critical that we address this crisis. The administration and the mortgage industry must reach agreement that matches the scale of the problem. If you produce an inadequate agreement, or fail outright, the cost to our economy will be incalculable."
The U.S. Treasury Depart-ment has recently been pushing the mortgage industry to temporarily freeze interest rates for some borrowers with teaser rate ARMs that are about to reset and may be unaffordable, which would further spike the foreclosure problem.
Clinton wants any agreement reached to include a moratorium on foreclosures of at least 90 days on owner-occupied homes with subprime mortgages and a rate freeze on ARMs of at least five years or a reworking of the loan into a fixed-rate. Doing that would enable the market to stabilize and afford homeowners the time to build equity. She also wants the industry to provide regular reports on the number of reworked mortgages.
In the absence of these specifics, Clinton said she would push for legislation that would allow lenders to convert subprime mortgages into affordable loans without securing the approval of investors. Further, Clinton asked for a $5 billion fund to help stricken communities and homeowners to cope with the foreclosure crisis.