By Steve Cook
By writing down all underwater mortgages to market value, the nation’s banks could pump $71 billion per year into the economy, create more than one million jobs annually and save families $6,500 per year on mortgage payments.
That’s the bottom line in a new report by The New Bottom Line, a nationwide campaign representing 1,000 faith-based and community organizations seeking to hold Wall Street accountable and find solutions for struggling and middle-class families.
Grassroots organizations across the country aligned with The New Bottom Line campaign are calling on State Attorneys General who are investigating the banks for foreclosure fraud to stand firm for a settlement agreement that both includes large-scale principle reduction for underwater borrowers and does not release the banks from claims beyond the robo-signing scandal.
“Homeowners across the nation are struggling to pay their boom-era mortgages with their recession-era salaries and the economy is suffering for it. Writing down the principals and interest rates on all underwater mortgages to market value would serve as the second stimulus that America so desperately needs, only without added costs to taxpayers,” according to the report entitled “The Win/Win Solution: How Fixing the Housing Crisis Will Create One Million Jobs.”
The plan would lower homeowners’ mortgage payments by an average of more than $500 per month or $6,500 per year. Six billion dollars per month that is currently going to mortgage payments would instead go toward buying groceries, school supplies, and other household necessities.
As consumer demand picked up, businesses would start hiring again. For example, the plan would inject an annual stimulus of $20.5 billion in California and 300,000 jobs per year; $1.64 billion in Ohio and 24,000 jobs; and $12 billion in Florida and almost 180,000 jobs.
Last year, the nation’s top six banks paid out more than twice the cost of the plan ($71 billion per year) in bonuses and compensation alone ($146 billion in 2010), the report says. Currently, the nation’s banks are sitting on a historically high level of cash reserves—$1.64 trillion.
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