Democrats Push for More Foreclosure Prevention with TARP Funds

According to Congressional Quarterly yesterday, House Democrats are gearing up to demand more TARP funding for foreclosure prevention. House Speaker Nancy Pelosi and House Financial Services Chairman Barney Frank have been collaborating on a bill that would close a loophole found in the original bailout language. This bill would take much needed steps towards redirecting funds and keeping people in their homes.

House Speaker Nancy Pelosi said Monday she has directed House Financial Services Chairman Barney Frank , D-Mass., to write a bill that would enforce language in the bailout law intended to keep people in their homes.

“It was very clearly spelled out in the initial legislation that funds would be used for mortgage foreclosure forbearance,” Pelosi said, adding that the foreclosure language was essential for winning Democratic support to pass the broader bailout bill.

But when Treasury Secretary Henry M. Paulson Jr. abandoned the asset purchase program, instead favoring capital injections for banks, the foreclosure prevention language also fell by the wayside. So far, Paulson has resisted calls to do more to offer direct help for struggling borrowers. 

Pelosi emphasized that some of the last batch of potential TARP funding should be provided to mortgage foreclosure relief, but she added that she had set no set goal for how much should be provided to help homeowners. “As much as is needed,” Pelosi said. “Because that is really what is going to get to the core of the financial crisis. . . . People are losing their homes. . . . Communities are affected.”

Many Democrats are outraged with how TARP bailout funds have been handled by the Treasury. While the bailout language states explicitly that efforts must be made to prevent housing foreclosures, Treasury Secretary Henry Paulson has largely ignored it and focused on capital injections for banks. NDN applauds Pelosi and Frank for undertaking this effort, as we have argued since September that keeping people in their homes is essential to abating the financial crisis. For more on NDN’s campaign to keep people in their homes, click here.