Presidential candidate Hillary Clinton is pushing for a 90 day ban on foreclosures and a 5 year “freeze” on adjsutable rate mortgages.  Clinton sent the following letter to Treasury Secretary Henry Paulson calling for needed steps to end the foreclosure crisis.

December 3, 2007

The Honorable Henry M. Paulson, Jr.
Secretary
United States Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220

Dear Mr. Secretary:

I am encouraged by news accounts that Treasury officials are negotiating an agreement with the mortgage industry to curb the foreclosure crisis. Reports of this agreement indicate that it will allow homeowners to apply to quickly refinance their mortgages or temporarily stop their adjustable rate mortgages from resetting at higher levels.

It is critical that we address this crisis. The Administration and the mortgage industry must reach an 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. A satisfactory agreement must do at least the following: impose a moratorium on foreclosures, freeze mortgage rates before they escalate, and require that the mortgage industry report its progress on loan modifications:

Read more of Clinton’s letter here. Below are some more details of her proposal to Paulosn.

• Impose a foreclosure moratorium of at least 90 days on subprime, owner-occupied homes. The moratorium will stop foreclosures until lenders and servicers have an opportunity to implement the freeze in mortgage rates. Servicers have complained that they do not have the systems in place to quickly contact the large numbers of at-risk borrowers. Servicers can certainly expect that during the moratorium at-risk borrowers will contact them. The moratorium will also give state and city organizations as well as community groups the necessary time to provide financial counseling to at-risk homeowners. The moratorium only applies to owner-occupied houses, and therefore excludes real estate speculators.
• Freeze the monthly rate on subprime adjustable rate mortgages, with the freeze lasting at least 5 years or until the mortgages have been converted into affordable, fixed-rate loans. After the moratorium, there should be a long freeze in rates on adjustable rate mortgages. The overwhelming majority of subprime mortgages have adjustable rates. The long rate-freeze will give the housing market time to stabilize. It will give families an opportunity to rebuild equity in their homes. It also gives the mortgage industry time, and incentive, to convert mortgages that were designed to fail into loans that are actually affordable. The rate freeze and loan modification must be extended not only to borrowers who are current but to some who have fallen behind. After all, it is indisputable that brokers and mortgage companies lured families into mortgages which were designed to end in foreclosure. This was only possible because regulators were asleep at the switch. A rate freeze is critical. An average of $30 billion in loans will reset monthly next year. One study indicates that the average reset increases monthly payments by 40%. It is no surprise that rate resets are the major driver of the foreclosure crisis. The rate freeze and loan modification would only apply to owner-occupied houses.
• Require the mortgage industry to provide status reports on the number of mortgages it has modified. Resolution of the foreclosure crisis will require that large numbers of unworkable mortgages be converted to more stable loans. To date, however, despite pressure from Congress and the press, lenders and servicers have modified only about 1% of subprime mortgages. This obviously has to change. We cannot take the industry at its words that it will follow through on an agreement to convert loans expeditiously. Accordingly, the agreement must impose on lenders and servicers an obligation to regularly report their modifications.