Dems: Obama broke pledge to force banks to help homeowners
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Before he took office, President Obama repeatedly promised voters and Democrats in Congress that he'd fight for changes to bankruptcy laws to help homeowners"a tough approach that would force banks to modify mortgages.
"I will change our bankruptcy laws to make it easier for families to stay in their homes," Obama told supporters at a Colorado rally on September 16, 2008, the same day as the bailout of AIG.
Bankruptcy judges have long been barred from lowering mortgage payments on primary residences, though they could do it with nearly all other types of debt, even mortgages on vacation homes. Obama promised to change that, describing it as exactly "the kind of out-of-touch Washington loophole that makes no sense."
But when it came time to fight for the measure, he didn't show up. Some Democrats now say his administration actually undermined it behind the scenes.
"Their behavior did not well serve the country," said Rep. Zoe Lofgren (D-CA), who led House negotiations to enact the change, known as "cramdown." It was "extremely disappointing."
Instead, the administration has relied on a voluntary program with few sticks, that simply offers banks incentives to modify mortgages. Known as Home Affordable Modification Program, or HAMP, the program was modeled after an industry plan. The administration also wrote it carefully to exclude millions of homeowners seen as undeserving.
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