Chosing Sides

As if there was any doubt:

...President Bush sided with banks and mortgage lenders on Tuesday, threatening to veto a bill being offered by Senate Democrats that would give more bargaining power to homeowners who face foreclosure.

Opening what is likely to be an intense political battle in the deepening mortgage crisis, the White House said it strongly opposed the bill, which would let bankruptcy court judges modify the terms of a mortgage as part of the restructuring of a debt in a bankruptcy filing.

Supporters of the legislation say it could prevent as many as 600,000 home foreclosures affecting people who took out tickler or other complicated mortgages and now face steep increases in interest rates and monthly payments.

Consumer and civil rights groups argue that the change in bankruptcy law would provide the surest way of helping families renegotiate mortgages that have been bundled into complex securities and sold to investors.

But mortgage lenders, and the Wall Street firms that purchased the loans, have mounted a campaign against the bill, saying it would send a chilling message to investors and lead to higher borrowing costs in the future...

Unlike most other kinds of debt, including loans for vacation homes and rental properties, mortgages on a primary residence are outside the power of federal bankruptcy judges to change...

The Bush administration has started a program it calls Hope Now, which encourages mortgage lenders to modify loans and sometimes freeze interest rates for people who face big increases in their monthly payments.

But that program is voluntary, and the guidelines for providing relief are so narrow that it is expected to help only a tiny fraction of the 1.8 million subprime mortgage borrowers facing increases in these initial rates. Nor would the program provide help to people whose homes have declined in value and can no longer be sold for enough to pay off the mortgage.

Supporters argue that the bill could prevent more than 600,000 foreclosures, which are often more costly to lenders than reductions in monthly payments, and would prevent a chain reaction of declines in home prices in neighborhoods surrounding the foreclosed homes.

“Avoiding foreclosure can’t be just a part of the proposal, it is the heart of the proposal,” said Senator Richard J. Durbin, Democrat of Illinois and sponsor of the Senate measure...

Meaning of course, the government would have to be getting real about the rescue, which is something Dear Leader would never allow.