On behalf of hundreds of thousands of FreedomWorks members nationwide, I urge you to VOTE “NO” on H.R. 1106: Helping Families Save Their Homes Act of 2009. Also referred to as “cram-down,” this legislation allows bankruptcy judges to modify home mortgages, including reducing principal rather than leaving those business decisions in the hands of the banks and lenders who own the homes. In addition, the act modifies the Hope for Homeowners program by removing the taxpayer protections in place and making it easier for those who made risky choices to take advantage of taxpayer funds to bail them out on their mortgage.
Together, these propositions mean a vast incursion by the federal government into the housing market, forcing out private institutions and choices for customers. Cram down creates uncertainty in the lending market which could exacerbate the credit crunch and is likely to drive up interest rates or down payment requirements for borrowers as banks respond to the added risk of a judge changing their contract. The passage of the bill sets a frightening precedent for future legislation concerning the role of the federal government in contract law.
The Hope for Homeowners program has already proved to be a dismal failure. Rather than the thousands it was assumed it would help, only 25 loans have been approved since it’s inception in October. Instead of seeing this as a case of individuals taking loans far beyond their means for houses they cannot afford, this bill would removed the very requirements that protected taxpayer funds from further risky loans, putting more and more taxpayer money on the line for people who made poor choices.
The bill increases the amount FDIC insurance covers from $100,000 to the Emergency Economic Stabilization Act maximum of $250,000 that expires at the end of this year. FDIC insurance removes any incentive for most consumers to carefully choose their bank. Without insurance or government bailouts, people would have a reason to carefully shop for a prudent bank rather than handing their money over to anyone with an FDIC sticker on the drive through window. Making the EESA change permanent will end up removing any incentives for more consumers to avoid handing their money over to irresponsible over-leveraged banks on the verge of insolvency.
Ladling out bailouts in this fashion removes any incentive mortgage holders have to continue paying down their debt. A vast majority, 92%, are still faithfully making their payments regardless of the economic downturn that has led to falling house value, lost savings, and lost jobs. These individuals are still making the tough choices to do the right thing and they should not have to pay for the poor choices of others.
We will count your vote on H.R. 1106 as a KEY VOTE when calculating the FreedomWorks Economic Freedom Scorecard for 2009. The FreedomWorks Economic Freedom Scorecard is used to determine eligibility for the Jefferson Award, which recognizes members of Congress with voting records that support economic freedom.
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