Congress approved The Emergency Economic Stabilization Act last week and it was quickly signed by President Bush on Friday. Although the bill contains language requiring the Treasury Department to develop a plan to “mitigate” foreclosures and requires federal agencies to encourage mortgage companies to modify the loans of borrowers in danger of foreclosure or refinance their loans under the Hope for Homeowners plan. The real issue with the Emergency Economic Stabilization Act is that the language protecting homeowners is too broad and does not directly address a specific course of action to help distressed homeowners.
Also, this bill does not give the Treasury the power to restructure toxic loans itself. We all know that if given the “option” to “voluntarily” restructure loans for borrowers, many companies will choose not to take that action. Because of the bills broad language and lack of demands, homeowners are left at the mercy of lenders.