2007/08/29 Council Agenda Packet

- • • Resolution on e Housing Crisis Whereas, keeping people in their homes and preventing predatory lending practices are present in the rights established in the general welfare clause in the Preamble of our Constitution; Whereas,the projected number of foreclosures in 2007 is up to two million homes (John Burns Real Estate Consulting, May 22, 2007), many due to unethical lending practices; and Whereas,the collapse of hedge funds, e.g. Bear Stearns, heavily invested in sub prime mortgages threatens to set off a chain reaction collapse of the Mortgage Backed Securities (MBS) and (CDO) Collateralized Debt Obligations markets,jeopardizing many national programs such as student loans and pensions, causing ultimately, the blow out of the global monetary and financial system. Therefore be it resolved, that The Council of State Governments. Midwestern Legislative Conference urges congress to establish a federal agency immediately implementing the following three points as a beginning solution to the economic crisis. 1.Place the Federal and state chartered banks under protection, freezing all existing home mortgages for a period of however many months or years required to adjust the values to fair prices; restructure existing mortgages at appropriate interest rates, and write off all of the cancerous speculative debt obligations of mortgage-backed securities, derivatives, ect. 2. This Federal agency during this transitional period will freeze all foreclosures, assuring American families retain their homes. Monthly payments, the effective equivalent of rental payments, shall be made to designated banks, which can then use the funds as collateral for normal lending practices, thus recapitalizing the banking system. The monthly rental payments will be factored into new mortgages, reflecting the deflation of the housing bubble, and the establishment of appropriate property valuations, and reduced fixed mortgage interest rates. The federal and state chartered banks shall be protected, so they can resume their traditional functions, serving the local communities and facilitating credit for investment in productive industries, agriculture, infrastructure,ect. 3. The state Governors shall assume administrative responsibilities for implementing the program, incuding the "rental" assessment to designated banks, under the authority of the Federal government, which will provide the necessary credits and guarantees to assure the successful transition.