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TechnoratiObama's Sub-Prime Conflict
I remember my first piggy bank: a little pink piggy, made of plastic, with a little slot at the top. The slot was big enough, perhaps, to fit a half dollar, a great deal of money to me at the time."A penny earned is a penny saved," my father told me, as we dropped the first few coins into the opening, and I heard them hit bottom and bounce. And I can't tell you how excited I was when we broke it open, after a year or so, and I couldn't fit another penny into the slot.
I tallied up my stash-close to five dollars, I recall- and decided what I would do with my small fortune. I bought a kite, and my imagination soared even higher than my beautiful Chinese box-kite as to what I would save up for next.
My pop gave me a powerful push in the right direction, when it came to savings: A penny saved really was a penny earned.
Unfortunately, this wasn't the case for the 1,406 people who lost much of their life savings when Superior Bank of Chicago went belly up in 2001 with over $1 billion in insured and uninsured deposits. This collapse came amid harsh criticism of how Superior's owners promoted sub-prime home mortgages. As part of a settlement, the owners paid $100 million and agreed to pay another $335 million over 15 years at no interest.
The uninsured depositors were dealt another blow recently when the U.S. Supreme Court let stand a lower court decision to put any recovered money toward the debt that the bank owners owe the federal government before the depositors get anything.
But this seven-year-old bank failure has relevance in another way today, since the chair of Superior's board for five years was Penny Pritzker, a member of one of America's richest families and the current Finance Chair for the presidential campaign of Barack Obama, the same candidate who has lashed out against predatory lending.
During a recent campaign stop in south Texas, Obama met with San Antonio-area residents who had been particularly hard hit by the sub-prime meltdown. He expressed dismay over how lobbyists for the sub-prime lending industry had spent more than $185 million in the last several years for their cause.
"To give you a sense of what that kind of lobbying gets you," Obama said, a "CEO of the largest sub-prime lender was promised a $100-million severance package at a time when more than two million Americans were facing foreclosure, including nearly 14,000 right here in San Antonio."
Though Superior Bank collapsed years before the current sub-prime turmoil that is rocking the world's financial markets - and pushing those millions of homeowners toward foreclosure - some banking experts say the Pritzkers and Superior hold a special place in the history of the sub-prime fiasco.
"The [sub-prime] financial engineering that created the Wall Street meltdown was developed by the Pritzkers and Ernst and Young, working with Merrill Lynch to sell bonds securitized by sub-prime mortgages," Timothy J. Anderson, a whistleblower on financial and bank fraud, told me in an interview.
"The sub-prime mortgages," Anderson said, "were provided to Merrill Lynch, by a nation-wide Pritzker origination system, using Superior as the cash cow, with many millions in FDIC insured deposits. Superior's owners were to sub-prime lending, what Michael Milken was to junk bonds."
In other words, if you traced today's sub-prime crisis back to its origins, you would come upon the role of the Pritzkers and Superior Bank of Chicago.
One Failure to the Next
Superior was founded at the tail end of 1988 in the wake of the failed Lyons Savings Bank. The Feds were trying to keep a lid on the magnitude of the S&L post-deregulation crisis and were selling failed or failing thrifts for a song, along with a lucrative package of special benefits.
Chicago's billionaire Pritzker family and their partners bought Lyons Savings for a quite reasonable $42.5 million, but were also given $645 million in tax credits. The kicker was that the buyers only had to come up with $1 million in cash, and got access to the $645 million, and all the bank's deposits insured by the Federal Savings and Loan Insurance Corporation (FSLIC).
The Pritzker family's Superior Bank "started life with enormous tax benefits and a substantial amount of FSLIC-guaranteed assets under a FSLIC assistance agreement," said financial consultant Bert Ely in a Oct. 16, 2001, statement before the U.S. Senate Committee on Banking, Housing and Urban Affairs.
Ely stated, "Superior's trick, or business plan" under Penny Pritzker's leadership was apparently "to concentrate on sub-prime lending, principally on home mortgages, but for a while in sub-prime auto lending, too." In December 1992, the Pritzkers acquired Alliance Funding, a wholesale mortgage organization.
In a 2002 article in In These Times about Superior Bank's collapse, business writer David Moberg reported that the bank's operations were "tainted with the hallmarks of a mini-Enron scandal...And yet the bank's owners, members of one of America's wealthiest families, ultimately could end up profiting from the bank's collapse, while many of Superior's borrowers and depositors suffer financial losses."
Moberg wrote that "the Superior story has a familiar ring. ... Using a variety of shell companies and complex financial gimmicks, Superior's managers and owners exaggerated the profits and financial soundness of the bank. While the company actually lost money throughout most of the '90s, publicly it appeared to be growing remarkably fast and making unusually large profits. Under that cover, the floundering enterprise paid its owners huge dividends and provided them favorable loans and other financial deals deemed illegal by federal investigators.
"Superior's outside auditor, which doubled as a financial consultant, engaged in dubious accounting practices that kept feckless regulators at bay. Many individuals-disproportionately low-income and minority borrowers with spotty credit records-had apparently been exploited through predatory-lending techniques, including exorbitant fees, inadequate disclosure and high interest rates."
When it collapsed in 2001, Superior Bank represented the largest failure of a U.S.-insured depository institution for a decade.
"The failure of Superior Bank was directly attributable to the Bank's Board of Directors and executives ignoring sound risk management principles," said FDIC Inspector General Gaston Gianni Jr. in a Feb. 7, 2002, report.
Banking whistleblower Anderson noted that "Superior failed at a time of historically low interest rates, high employment, a strong economy, and a growing housing market. ... There was no reason for it to fail unless you consider gross negligence, a flawed business plan, and a conspiracy to deceive the regulators who were clearly asleep and were negligent themselves in their duties of protecting the class of underinsured depositors."
Pioneering Work
Anderson said the bank owners and board members used Superior for their pioneering work in sub-prime lending, developing the financial instruments that helped set the stage for the current sub-prime meltdown.
"The Pritzkers like to say they did sub-prime lending to help the disadvantaged get into the home equity business, [but] it would be more accurate to state they ran a very large nation-wide predatory lending operation," Anderson said, citing criticism of Superior's lending practices in a letter written to the Office of Thrift Supervision on July 3, 2002, by the National Community Reinvestment Coalition, an association of more than 600 community-based organizations that promote access to basic banking services.
As an owner and board chair of Superior, Penny Pritzker also was named in a RICO class action suit on behalf of the more than 1,400 depositors at Superior, who initially lost over $50 million of their life savings.
"This is a story of two Americas with two sets of laws, one for the rich and powerful and another for the rest of us," said Clint Krislov, the depositors' attorney, in a recent interview. "My clients will all be dead, before they get back their money, given the Supreme Court's recent decision to uphold the lower court, which put the predatory owners on the front of the line, if any money is recovered."
The Pritzkers arrayed a powerful and well-connected legal team including former President Bill Clinton's impeachment lawyer Lanny Davis, two ex-comptrollers of the currency, and two former General Counsels to the FDIC, the American Banker Magazine reported.
Given the political sensitivity of the sub-prime mortgage crisis, Anderson said he believes Penny Pritzker should resign her post as Obama's Finance Chair, the person who oversees the campaign's fundraising.
Otherwise, Anderson said, Pritzker's presence could undercut Obama's credibility on the issue of predatory lending and create a possible conflict of interest if Obama is elected President and tries to crack down on sub-prime abuses.
Obama campaign spokesman Tommy Vietor had no comment about the controversy surrounding Pritzker, but added: "Barack Obama has already made it very clear that he's going to crack down on fraudulent brokers and lenders."
One might wonder why Hillary Clinton's campaign hasn't jumped on this issue. Maybe it's because Penny's little brother, J.B. Pritzker, is a mover and shaker in the Clinton campaign.
In May of 2007, Jay Robert, aka, (J.B.) Pritzker, threw his support behind Hillary Clinton, representing a coup for her campaign by wresting the billionaire out of Obama's home town of Chicago, and better still, the brother of Obama's Campaign Finance Chair.
J.B. Pritzker announced he would head a new grassroots organization called Citizens for Hillary Clinton. Pritzker told reporters at the time, the new organization would go into states "where we haven't fully organized" and seek out campaign supporters as well as raise funds.
Apparently the Pritzkers will be sitting at the head table at the Inaugural Ball if either Democrat wins.
Dennis Bernstein is an award-winning investigative reporter and public radio producer. He is co-host and executive producer of the daily radio news magazine, Flashpoints, on Pacifica Radio, and a contributing editor to the Pacific News Service.
© 2008 Consortiumnews.com
33 Comments so far
Show AllYou might want to check out the Earl Ofari Hutchinson's post on the Huffington site, where he asks why the Obama campaign doesn't ask former Superior Bank board member Penny Pritzker to resign as its national finance chair, if Obama is really going to do something about the subprime mortgage lending/predatory lending/foreclosure crisis that holds the bankers responsible for their apparent white-collar crimes?
Actually, the Obama campaign has been funded mainly by the bundled individual contributions from corporation executives who work at firms like Goldman Sachs. If you check out the Center for Responsive Politics site, for instance, you'll notice that the Obama campaign's top donor is Goldman Sachs, where individuals affiliated with Goldman Sachs contributed $474,428 to the Obama campaign Corporation executives at JP Morgan also have contributed over $200,000 to the Obama campaign.
People keep throwing this shit at Obama, but it doesnt' stick. Obama is funded by over 1 million individual small contributors like me. Show me the conspiracy.
After the Illinois-based Superior Bank S&L collapsed in July 2001, the Office of Inspector General's Feb. 2002 report concluded that "based on our review of the failure of Superior Bank it appears that some of the decisions made by Superior management rise to the level of insider abuse."
Yet before Superior Bank failed, Obama accepted a $1,000 campaign contribution on Sept. 14, 1999 from then Superior Bank board member Penny Pritzker. And after naming Penny Pritzker to be his 2008 presidential campaign's national finance chair on Jan. 31, 2007, Obama said that he was "proud that" the former Superior Bank official "has agreed to partner with me in this important venture."
Coincidentally, although many Illinois residents were affected negatively by the Superior Bank scandal, as a member of the U.S. Senate Committee on Homeland Security which has authority to investigate "all other aspects of crime and lawlessness within the United States...including investment fraud schemes, commodity and security fraud, and the use of offshore banking and corporate facilities to carry out criminal objectives," Obama has apparently not called for any U.S. Senate committee full investigation of the role that the Pritzker family played in the Superior Bank "subprime mortgage-lending and predatory lending" S&L scandal.
Anyone who says Bill Clinton was worse than than Ronald Reagan isn't being honest. Just look at their economic records. Clinton was far better than Reagan, and the comparison is stunning.
http://zzpat.tripod.com/
Reagan was the first president to give us huge budget deficits and massive national debt. Clinton gave us budget surpluses and began paying down the national debt.
Reagan gave tax cuts to the rich and cut domestic spending, and called it "trickle-down" economics. Clinton restored the tax rates for the rich and increased domestic spending, thus stimulating the economy (trickle-up economics).
Reagan gave us the recession of 1982/83, the worst since the Great Depression. Clinton gave us a booming economy and near full employment.
http://www.ibew.com/legislative/Rev042304-JustFacts.pdf
Under Reagan, the middle class got smaller as people slipped into poverty. Under Clinton, poverty decreased as poor people climbed into the middle class.
Reagan increased military spending, Clinton cut the bloated military budget.
Reagan invented and sold the concept of "deregulation," saying "government is the problem, not the solution." He cut regulatory agency budgets, appointed administrators who were antithetical to their agencies' missions, and threatened to eliminate the the agencies entirely if they tried to enforce pollution, occupational safety and health, civil rights and other regulations. Clinton restored budgets and appointed competent administrators.
It's true that Clinton was a centrist Democrat, and was closer to the Republicans than previous Democratic presidents like JFK and LBJ. But, Ronald Reagan was a right-wing Republican, much more right-wing than other Republican presidents like Nixon, Ford and George H.W. Bush. That's right, I said Nixon! Reagan was much more right-wing than Nixon.
It's true that Clinton did some things that put business profits ahead of the public interest. He was a disappointment in many ways. But we should also remember that after trying (and failing) to implement universal healthcare, powerful business and media interests attacked him and funded the backlash, Republican "revolution" of 1994, resulting in both houses of Congress going to the Republicans for the remainder of Clinton's term in office. That, along with the political investigations and smear campaigns that followed severely limited Clinton's power.
Those who say Clinton was "just as bad" or "worse" than Reagan, are trying to re-write history and are really doing a disservice to all of us.
Their myopic viewpoint is also the first step towards a false conclusion about the 2008 presidential election. If they can establish the myth that Bill Clinton was just as bad as the Republicans, it follows that any other Democrat would have to be better than another Clinton. Thus, the belief that Obama is better than Hillary.
If you think Obama is more Progressive than Hillary, you need to take my Test of Knowledge. Comparing their voting records in the Senate, it is clear that Hillary is much more Progressive than Obama.
See my post on February 28th, 2008 3:26pm, linked below:
http://www.commondreams.org/archive/2008/02/28/7343/
Personally, I am supporting Ralph Nader for President. However, of the other candidates Obama is much more of a Republican than is Hillary.
Keep hoping, buddy. Hope is what has kept this disgrace going for 200 years.
We need people who refuse to play by the invertebrate rules. People who speak up, plainly, honestly, etc. When they lose time, and time, and time again -- the country will eventually have no choice except to vote for an opposition which is honest and forthright.
It is the Clintons and Obamas that pushed out Edwards, Kucinich and Nader from the debate. Invertebrates among the so-called opposition, not invertebrates in the other side.
All of us are connected in our jobs to corporations that do predatory practices to individuals all over the world. To be pure and self-righteous won't change anything. It would be impossible for anyone to get elected President without some unsavory alliances. Once elected, he/she doesn't have to make policy to please these characters. As Jerry Brown once remarked to Jackson Browne, " I agree with you, but if I acted on it, I couldn't get elected. And if I'm not in office, I can't change anything." I am hoping that Obama is playing this same game.
Yes, Bill Klanton, the second Klan president and the illegitimate son of the Gipper and his whiiny wife are different in the policies they support from the Gipper, the first Klan president, as Bill Klanton was harder on the working class, threw out the social safety net the Gipper never did anything about, deregulated banking, thus setting us up for the damn sub prime damn mess we're now getting into. Yes, the Klantons were significantly different and worse than the Gipper. It took W to give us a president any worse than Bill Klanton. No wonder people internationally think of the American people as being so damned stupid. It's undercoverization of American exceptionalization horse hockey complex. Now the Hilary "the doormat" for Bill Klanton is campaigning for president as a "feminist." Now that's a real walking, talking contradiction in terms. Whew, that white woman shonuf know how to lie through her teeth.
The good news is she hasn't got a snow ball's chance in hell of getting to the White House except as a guest, because John McCain will probably beat her by a landslide given her negatives one poll shows at 50% before the GOP attack machine has even gone after her. She's ready from "day one" to threw this election away and make sure the GOP
holds the presidency and takes back the congress to make the GOP a permanent majority party and fascism in the USA permanent. Vote for Hilary to destroy US democracy for ever.
Since this discussion has devolved into a "Democrats and Republicans are all the same" whine, I'd like to remind everyone that there were very significant differences between the Reagan and Clinton economic records. Here's a year by year comparison:
http://zzpat.tripod.com/
It's good to review these figures now, since it is becoming more and more apparent that Obama is the new Reagan: style over substance, populist rhetoric masking a profits-over-people, Wall Street agenda, deregulation and domestic spending cuts, along with increased military spending.
Meanwhile, we've known for a while that Hillary Clinton is the new Bill Clinton.
Assuming that their foreign policies would be similar, the question becomes who do you want running the economy for the next eight years, another Reagan or another Clinton?
There is a talk show host named John Rothman on KGO in No.Cal. He sounds very liberal, knows what to say to suck progressives in. But when it came to impeachment or pulling the troops out,he squashed these comments immediately, hanging up on people or belittling them. He will go ballistic if anyone suggests that Israel's tactics are brutal.
There are Reich wing tools who operate in the same way. They are knowledgeable on issues but keep feeding readers the same cynical, simplistic rants. We are told everyday it is hopeless, we are powerless, there is no sense trying, all politicians are the same. This type of thinking leads us where? What is the motivation? Why are they here everyday with the same message? Despair is good for fungi like Bush. They thrive on the apathy which is created by this steady stream of cynicism. As if seven years of horror was not enough to beat us down now we are told to forget any chance for change. Apparently there are a lot of people who are not buying this particular approach.
Indeed both parties feed at the same money trough, both waste our money. I would gladly pay more taxes if I could control where my tax $ goes. 'Tax and spend' or 'Borrow and spend'. The courts are almost shattered too, think Supreme Court when voting. Staying informed is a political act. If nothing else, call your reps (more than once if needed) and demand net neutrality. Otherwise the web may become another cnn.
Right, the fleecing of the baby-boomer's Social Security is probably next. I've got around another 17 yrs to go. That should give them plenty of time to loot it before many of us retire. Good points.
No, they'll both toss money at the after-effects of the problem. Neither can follow the money trail, jail the instigators, correct the underlying problems, etc.
We saw this with the S&L fleecing also. Keep in mind that while McCain was one of the bad guys (as my Airhead America affiliate pointed out the other day), 4 out of the 5 were Democrats.
The big question is what pot gets fleeced next. They've "done" they S&L's, they allowed the tech stocks to be gamed, they've "done" lending. My best guess is that they'll set up a self-fleecing health care program, fleece out retirement savings, or something along those lines. Build a pot, deregulate the hands that dip into it, and ala-kazaam! Disappearing money trick. Except nobody in the audience is really asking for an encore.
this is the sort of investigative journalism we needed before the first vote was cast in january. from one source and another i found nobody was perfect. i keep waiting for clinton to fire mark penn, but she won't. if obama will fire pritzker, it will help convince me that he is serious about dealing with some of the details of governing. if clinton fires her version of pritzker, that will make me feel a little better about her. but i wish she would fire mark penn first. and if wishes were horses, beggars wouldn't need to own a car.
Or another analogy might be the Republicans start the wars and the Democrats pay for it with a credit card marked US Citizen Gold Card. The card never expires. The bills go to your house and the customer service department is out of order. All you get an answer machine.
The same pattern happened here in Minnesota with regard to transportation funding. A powerful lobby of legitimate groups, coupled with contractors, twisted the arms of the Democrats to enact a flat gasoline salestax -- while oil is at record highs, people are struggling, etc.
The media, ALL MEDIA, including Public Radio and Airhead America presented the choice as tolls vs. gas tax. NOBODY dared utter the phrase "progressive income tax".
I've come to see the chief difference between Democrats and Republicans as that between forced subsidy of corporations (Dems) vs. the interests of the independently wealthy (Repubs).
As a struggling wage-slave, it's just "wonderful" choice isn't it?
Democrats like to make taxpayers pay insurance companies for health insurance under the threat of law. Republicans leave you in the city ward, or, privatize it, so you pay up or stay out in the cold.
The chief difference between Republicans and Democrats is that Republicans deregulate and thus cause the crime, whereas Democrats will make taxpayers bail it out -- proving that crime, in a sense, does indeed pay.
Of all of the original candidates only 2 were not members of the "Council on Foreign Relations", Kucinich and Paul. I watched 2 videos of the CFR, first was Cheney saying how great it was to be back at the CFR, the second was Hillary also at the CFR saying how great is was to be back at the CFR.
Since Kucinich dropped out the only one I can vote for is Paul. He is for getting out of Iraq and understands how the Neocon's quest for empire is bankrupting this country. I do not like many of his domestic policies but that is why we need a strong Democratic congress to keep those in check.
I am waiting to see who McCain picks for VP (actually who the neocons pick). Rick Perry Texas governor
was at the last Bilderburg conference, if he is selected you will know that the fix is in.
We need a military draft in this country; its the only solution to putting and end to this never ending sociopathic war.
The sub-primes were a well executed hit on our economy, so no suprise one of the players is a member of Obamas team.
Paul Volcker endorsing Obama was the last straw to me, especially with Brzezinski running his foreign policy agenda. That confirms in my mind that Obama is a Trilateral chosen front runner, the same SOB's that have us sold us this globalization and neoliberal- free trade economics BS and have worked so hard to bring down our economy and standard of living so we can be comfortably merged with the rest of the world under a global government in the New World Order.
So much for change. Change in Orwellian newspeak means stay the course.
Institute for Public Accuracy
http://www.accuracy.org
posted the following on the subject - involving Hillary Clinton:
Anderson, a Chicago-based specialist in banking regulation who
reported on much of the Savings and Loan scandals of the 1980s has
closely examined the collapse of Superior Bank and the role of the
Pritzker family.
He said today: "The Pritzkers like to say they did sub-prime lending
to help the disadvantaged, but it would be more accurate to state they
ran a very large nationwide predatory lending operation. They approached
people who already had homes and convinced them to re-finance with
unfavorable conditions through predatory lending.
"The sub-prime financial engineering that created the Wall Street
meltdown was developed by the Pritzkers and Ernst and Young, working
with Merrill Lynch to sell bonds securitized by sub-prime mortgages.
Superior's owners were to sub-prime lending what Michael Milken was to
junk bonds. Their sweetheart settlement with the government precluded
criminal prosecution for their conduct and let them walk away with
hundreds of millions of dollars. Pritzker should resign immediately as
finance chair of the Obama campaign.
"One may ask why the Clinton campaign hasn't raised all this. Well,
Penny's younger brother, Jay Robert 'J.B.' Pritzker, is national
chairman of Citizens for Hillary. This is a very connected, very
sophisticated family."
Anderson is a whistleblower on financial and bank fraud, and has
been profiled as a "hellraiser" in Mother Jones magazine:
.
Well, let's see, Don't vote for Obama, nor Clinton, nor nader-gonzales-haven't got a seat at the table and not likely to get one. Who does that leave? Bomb Bomb McCain. It seems to me that the articles here should not be interpreted as to whom or not whom to vote for, but for some clarity about what you are not going to get in the way of concessions this time around.Listen to Dennis, he does his homework, Amy Goodman too, and Bill Moyers and encourage your family, your friends, even your enemies to take a listen. That's the way to build critical mass over time. Of all the candidates being presented that I see getting a snow=ball's chance in hell I think it may very well be Obama. I imagine he will manage to take back at least a bit of what we've lost in the Bush-Clinton-Bush years.
Just another reason not to vote for Obama.
If the campaign were based on issues, Obama would have dropped out long ago with little support.
That he has so much support says much about how little informed the public is or cares to be.
No change found here. Huge accumulations of private wealth are always completely protected, by well paid armies of lawyers and accountants, at all social costs. This is normality for the US of I. In fact its a natural process, by which intergenerational transfers of wealth can allow some individuals to live with obscenely large amounts of power and wealth. And take advantage of all the best scams that abound. It explains the moves to eviscerate the social welfare system. A remaining pile of money identified as not yet in the hands of private wealth. The end result, after many generations is what kind of nation? Change comes in many forms, but the underlying dynamic processes remain the same. Be careful about what small change in how things really run, you might get.
I kneel to Obama, my Messiah, who can do no wrong.
The Pritzkers aren't one big happy family. But, this, and many stories like it, remind me of who is, and always was in contol of 'free' society- the Lender (i.e. the Bank, i.e. the Rich, i.e. Tha Man), even in a time of kings and popes, the lender is in charge.
Sorry, but the corny opening to this piece was too much: The author then bought a kite with his piggy bank money and his imagination soared. Ouch. Lay off the bs a little.
See, this once again proves that "change" is just a political manipulative illusion. Once you are awash in the Washington culture, there is no way to extricate yourself from it.
The Pritzkers aren't running for President and Obama has been clear on this issue. It's a smear tactic the same way the Tony Rezko stuff is. Obama's campaign is funded by over 1 million Americans, not Tony Rezko and the Pritzkers. All kinds of people get involved in politics and the fact is that Barack Obama did not enable anything that happened with Superior, unlike John Edwards, who actually was invested and employed by the predatory lending giant Fortress Investments. That's a major difference.
I listen to Flashpoints at 5 p.m. in San Francisco, KPFA 94.1 FM. Dennis mentioned this story yesterday and says that today's broadcast will be devoted to it. I will listen despite my growing realization that no Democratic president can or will change very much, and I know that there will be a lot of detail not included in this article. Today's Democracy now featured both Clinton and Obama postitions re use of private contractors in Iraq - that neither plans to stop that use. Neither campaign spokespersons accepted invites to discuss. I will vote Democratic because of pending Supreme Court openings (and because I really hate Republican ideologies), but my expectations are low. Thanks Dennis for the inspiration to stay active in what ever way we can, to make continuing free speech happen despite the huge picture that stacks money against most of the rest of us.
The Pritzkers are hedging their bets. I wonder if any of them are working for McCain.
doug:
What about the Pritzkers?
http://www.barackobama.com/issues/economy/#home-ownership
Obama will crack down on fraudulent brokers and lenders. He will also make sure homebuyers have honest and complete information about their mortgage options, and he will give a tax credit to all middle-class homeowners.
Create a Universal Mortgage Credit: Obama will create a 10 percent universal mortgage credit to provide homeowners who do not itemize tax relief. This credit will provide an average of $500 to 10 million homeowners, the majority of whom earn less than $50,000 per year.
Ensure More Accountability in the Subprime Mortgage Industry: Obama has been closely monitoring the subprime mortgage situation for years, and introduced comprehensive legislation over a year ago to fight mortgage fraud and protect consumers against abusive lending practices. Obama's STOP FRAUD Act provides the first federal definition of mortgage fraud, increases funding for federal and state law enforcement programs, creates new criminal penalties for mortgage professionals found guilty of fraud, and requires industry insiders to report suspicious activity.
Mandate Accurate Loan Disclosure: Obama will create a Homeowner Obligation Made Explicit (HOME) score, which will provide potential borrowers with a simplified, standardized borrower metric (similar to APR) for home mortgages. The HOME score will allow individuals to easily compare various mortgage products and understand the full cost of the loan.
Create Fund to Help Homeowners Avoid Foreclosures: Obama will create a fund to help people refinance their mortgages and provide comprehensive supports to innocent homeowners. The fund will be partially paid for by Obama's increased penalties on lenders who act irresponsibly and commit fraud.
Close Bankruptcy Loophole for Mortgage Companies: Obama will work to eliminate the provision that prevents bankruptcy courts from modifying an individual's mortgage payments. Obama believes that the subprime mortgage industry, which has engaged in dangerous and sometimes unscrupulous business practices, should not be shielded by outdated federal law.