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Paulson's Lenders `Pause' Foreclosures; Clinton Says Her Proposals Made White House Move

Feb. 12, 2008 (EIRNS)—Hank Paulson's Treasury Department announced today that six big mortgage lenders, who hold or service about 20 million American mortgages, will hold off for 30 days on all home foreclosures on prime or subprime mortgage loans. Sen. Hillary Clinton, who has been campaigning hard for a proposed foreclosure moratorium of "at least 90 days" and a five-year mortgage freeze, immediately responded that the White House, though opposed, was being pushed toward her proposals by the reality of the mass foreclosures crisis. She called again on Sen. Barack Obama to support her general mortgage freeze.

The six lenders—Bank of America, Countrywide Financial, Washington Mutual, Wells Fargo & Co., JP Morgan Chase & Co., and Citigroup—are all enrolled in Paulson's HOPE NOW Alliance, a ballyhooed mortgage-refinancing initiative announced in early December. By all accounts, it has completely failed to slow down the continually rising wave of home foreclosures, which cost 250,000 American homeowners their houses in the fourth-quarter 2007 alone, and has surged even higher in January and February. In HOPE NOW, Paulson tip-toed around the outrageous proposals for a massive, inflationary Federal bailout of the lenders—made by PIMCO bond trader Bill Gross, New York Home Loan Bank head Alfred DelliBovi, and others—by telling the states to do the bailouts instead, with "refinancing bond issues." This, also, has failed.

Today, in what Treasury calls "Project Lifeline," the six big lenders pledged to suspend foreclosures, initially for a month, while trying to "work out more affordable loan terms" with delinquent homeowners.

Senator Clinton responded: "Several months and several hundred thousand foreclosure notices later, the Bush Administration is beginning to adopt my proposals to address the housing crisis. In early December I called on banks to observe a moratorium on foreclosures while they modified unworkable mortgages. Secretary Paulson said of my proposal: 'I don't think it makes sense to get in and intervene.' [Good Morning America, 1/18/08] But today the administration is announcing an agreement with banks to observe a foreclosure moratorium. Lenders retain too much discretion over granting the moratorium, but this is at least a start.... I recognized early on that we cannot jumpstart the economy without resolving the housing crisis. That is why I have called for the mortgage industry to observe a 90-day moratorium on foreclosures, and a 5-year freeze in mortgage rates on subprime adjustable rate mortgages.... Like the Bush Administration, Senator Obama has expressed skepticism about my housing proposal. But I hope that like the Bush administration, he too will eventually acknowledge that it is the right approach."