Selling Before Foreclosure

With the number of foreclosures still rising, and the peak  not expected until fall, more and more people will be  confronted with  the decision whether to sell before the foreclosure date.   Before deciding to sell the homeowner should be satisfied that selling is the best alternative.

Due diligence in this regard should include talking with a bankruptcy lawyer, consulting with a knowledgeable mortgage broker or other qualified consultant about the possibility of refinancing, negotiating with the foreclosing lender, contacting local governmental agencies to see about assistance programs, consulting with a foreclosure expert to see what price the property is likely to get if it were sold in foreclsoure and to understand the process, and speaking with a real estate agent with experience in foreclosures about the market.  I can’t over emphasize the importance of talking to people with expertise in foreclosures, as they are likely to be far more helpful than people with general experience.

Once it is determined that sale is the best option, the laws of the state should be ascertained.  Some states, such as Washington, have distressed property laws that are intended to assure that a home owner in this situation makes an informed decision before parting with title.

These laws generally speaking reduce the interest of investors in buying distressed property, creating great opportunity for investors who are willing to comply with the law.  The laws also dramatically reduce the number of “rescuers” who hound homeowners in financial crisis and often prove to bring only financial disaster to a home owner.

I recommend that you list the property with a real estate agent with knowledge and experience in the area.  If you try to sell without an agent, give yourself a deadline, then list it if the property has not sold.  An agent will give the property much more marketing exposure than the typical non-agent sale and the expertise in this situation is usually helpful.

In marketing the property,  emphasis should be placed on  assuring the prosepctive buyer that you have done your homework and that  the buyer need not fear running afoul of the depressed property laws of the state.  A lawyer can help with this.

There should be a backup plan.  Often people plan to file bankruptcy if the property is not sold by a specified date.  It is a good idea to have already consulted with a bankruptcy lawyer and have the papers ready to file before that date.

Dual Agency Issues: The New Depressed Property Law

Real estate agents are concerned about the situation in which they present an offer to buy unlisted property that is being foreclosed.

In that context if the agent says that the owner ought to sell to avoid the foreclosure or something of the sort the agent risks risk being deemed a “distressed home consultant,” and would then have fiduciary obligations to both sides of the transaction, as the agent would with a dual agency. In this situation though there is an inherently strong conflict of interest.

I believe that you would have to have the seller consult with a lawyer of his or her choice and have the seller be independently represented in the sale by the lawyer or an independent agent, perhaps chosen by the lawyer. The seller’s interests would then be protected and in the abstract I believe the agent would probably be deemed to have fulfilled his or her duty to the seller.

I would certainly recommend that even after the seller has independent representation the agent make full disclosure to the other side and maintain the highest level of honesty. I would strictly comply with the other requirements of the new law.

I’m not sure whether the new NWLS forms cover this situation, but it would certainly be appropriate to discuss the details of the situation with a lawyer at that time.

Washington Distressed Property Law (2)

It appears that most of the complaints about the equity skimming law are originating with representatives of real estate agents. (See a comment to an earlier entry.) The reason for this is that the law impresses new duties on the agents and with the new duties the prospect of liability. Over the years there has been a good deal of marketing to get you to think of real estate agents as “real estate professionals.” This law they believe is taking this idea too far.

The crux of this concern is that real estate agents might be characterized as “distressed home consultants” who the new law says owe a fiduciary duty to the the distressed home owner, someone facing foreclosure. Courts have described “fiduciary duty” as the highest obligation of care, loyalty and good faith. Most distressed home owners believe that they are getting this from the person who is advising them. (For that matter many people who retain a real estate agent imagine that they are receiving this level of commitment.) Illegal equity skimming, at least the cases I have seen, all involve engendering this level of confidence in the home owner and practicing beneath that level.

Representatives of real estate agents argue that this is not fair to the agents because the standard is vague and broad in scope. Remember though that the law applies only to agents, as well as all other people, who meet the definition of “distressed home consultants.” The law describes two categories of these “distressed home consultants.” The first is a person who solicits or contacts a “distressed home owner” and makes a representation or offer to to provide a service that will avoid the foreclosure.

The statute lists 13 types of offers that render a person a “distressed home consultant.” They include such things as avoiding or delaying the foreclosure, arranging a lease with a purchase option and the like. Do any of these things and you are a “distressed home consultant” with a fiduciary duty to the home owner. Clearly a real estate agent could inadvertently say something that would render him or her potentially liable as a fiduciary. So could anyone else.

The other way a person can be a “distressed home consultant” is by systematically contacting owners of homes that are in foreclosure. If you systematically solicit people in foreclosure you owe them a fiduciary duty. This should reduce the wildly misleading solicitations that are routinely sent to people after a notice of foreclosure is recorded, then published. Home owners in foreclosure receive dozens of these mailed promises of relief. Real estate agents, and others, who do mass mailings and target these people fall under the definition.

“Fiduciary duty” is a court-defined term that has been in use since long before Washington was a state. It is a term imposed by the courts where there is a relationship of trust and dependence. Its scope is defined by published cases, trial judges and juries. Lawyers have a fiduciary duty to their clients. Escrow agents and closers have fiduciary duties to both the buyer and the seller. The successor trustee performing the foreclosure has fiduciary duties. Trustees of real estate trusts and all other trusts have fiduciary duties. Partners in real estate transactions have fiduciary duties to each other. The concept is far from alien in real estate transactions.

What is interesting to me is that the real estate agents who are so confounded by the idea of having a fiduciary duty already have a fiduciary duty to their clients. This was imposed by the courts some time ago. When agents represent the buyer and the seller, a “dual agency,” they have fiduciary obligations to both sides. I hope that they are aware of this.

I presume that the aspect of fiduciary duty that troubles real estate agents the most is the standard of care. If a real estate agent or anyone else presumes to tell a person in foreclosure what to do or promises relief from the foreclosure, he or she should be held to the standard of care of a profession that can give such advise. This is currently the law. A real estate agent has court approval to fill in the blanks on real estate forms. A real estate agent is not permitted to discuss with the client the legal effect of contractual provisions. This would be the unauthorized practice of law. They are supposed to refer the client to a lawyer for legal advise.

In the context of a foreclosure a real estate agent, or any other person offering advise about what steps to take, is usually offering legal advise regarding foreclosure procedure or legal artifices to avoid foreclosure. This is not something most people (including real estate agents) are qualified to do and it has recently led to broad scale disasters for home owners in connection with equity skimming. A real estate person or anyone else finding himself or herself in this situation should refer the home owner to a lawyer rather than offering legal advise. This is already the law.

Washington’s New Distressed Property Law (1)

HB2791, entitled “Property Conveyances — Distressed” becomes effective June 12 and this prospect is causing concern and confusion in the residential real estate industry. Memos are flying around real estate agencies and you hear occasional cries of doom from bleak Cassandras and doleful Jeremiahs The law is not complex, so reasonably diligent agents and others in the field should at least not be confused. Furthermore, the law will not entrap any reasonably well intentioned and informed person in the future. It should, however, dramatically reduce pandemic fraud.

First, it applies to contracts signed after June 12. Any pending unconscionable equity skimming transactions, while not subject to the terms of the new law, should be abandoned in some sensible fashion, however, because of common law and statutory liability that predates SB 2791. (I have several of these lawsuits brought by deceived homeowners under the previously existing law.)

I often hear that this new law does far more harm than good because it scares aware legitimate foreclosure rescue investors. The homeowners will be tied to the tracks of nonjudicial foreclosure procedure and left destitute and homeless. That of course is exactly where these equity skimming schemes leave people. I have been involved with these for a few years now and I have yet to meet a homeowner who cliamed to have benefitted by an equity skimming arrangement, and I have heard of only one family that came out of it with their home. They lost all their equity and could barely make the payments on their heavily encumbered house but they last I heard still had it.

What is not spoken of much is that part of the scam is to convince homeowners not to legitimate alternatives to avoid the foreclosure. First, people can sell their houses and buy new ones, using the equity from the sale. They can also resort to bankruptcy to sell the house or reorganize their debts. That after all is why bankruptcy courts were created. Also a foreclosure slae does not mean that the homwowner will necessarily be left penniless.

Equity skimming is generally done by people who cannot afford to bid at a foreclosure sale and who want to get homes more cheaply than they would if they could afford to bid at a foreclosure sale.

Recently prices of homes being sold at foreclosure sales, because of competitive bidding, were about 60% on average of fair market value. The difference between the balance on the mortgage being foreclosed and the foreclosure slaes price would go to the homeowner. If not it went to pay secured debt that would have followed the homeowner after the foreclosure. So usually the homeowner would be in better financial shape with a foreclosure than by falling into one of the equity skimming schemes.

Sincere investors who really wanted to help the homeowners would just have to loan them the money to bring the mortgage currently, typically $8,000 to $20,000, and take a second mortgage at a profitable interest rate. Very simple and straight forward. Equity skimmers are after extravagant profit at the expense of distressed homeowners.

Equity Skimming in Washington: A Brief History

There are three main reasons that real estate has attracted so many unscrupulous people in recent years.

First it is an asset that can be highly leveraged. Homes can be purchased for a relatively small amount down and the balance financed. When property goes up in value this confers wild profit on the owner. For example, say you buy a home for $100,000 and pay 10% down. When the transaction closes you have purchased a $100,000 asset for an expenditure of one tenth its value. Putting aside transactional costs, if the property increases in value 25%, you have gained $25,000 in value on an original investment of $10,000. You more than doubled your money on a 25% increase in value of the asset.

The second aspect that attracts the criminally inclined, is that these very valuable assets are often owned by people who are not sophisticated in real estate financing. This is an area where people typically just given themselves to the grinding wheels of commerce without knowing a lot about what is going on in a real estate transaction. Thus there is great opportunity for duplicity behind a mask of convention.

This area is also relatively unpoliced. In the early 1900’s the scam of choice was securities fraud. So many people were falling victim to fraudulent securities schemes that the federal government created the Securities Exchange Commission and in the 1930’s passed legislation imposing severe penalties for securities fraud and implementing broad disclosure requirements.

Many equity skimmers would probably have been selling bunko stock one hundred years ago. The equity skimming schemes of today occupy a relatively unpoliced area without much in the way of legislation (although states such a Washington are passing legislation to thwart this form of fleecing). In short home sales is an area where a lot of money passes hands, there is potential for fast profit and there is not a great deal in the way of scrutiny — similar to stock sales before the Security Exchange Commission.

There have always been lots of real estate scams but for our purposes the story starts in the 1970’s. There was a recession in the early 70’s (or something that looked remarkably like one). An average house in Seattle could be purchased for $15,000, due in large part to local economic problems. This was followed by a period of inflation and breathtakingly high interest rates.

The inflation encouraged people to sell their real estate profitably, but the high interest rates prevented many people from getting loans to buy real estate. These pressures created an era of seller financing. The buyer would give the down payment to the seller and make monthly payments to the seller with an agreement to pay the purchase price off in full in three to five years, when financing could be obtained. This sort of arrangement was commonplace.

The buyer got the house and with it the obligation to pay payments to the seller and the obligation to continue to pay the seller’s mortgage. The buyer could assume FHA loans but usually the buyer just agreed to make the payments for the seller after the sale. The malevolent instincts that had been somewhat suppressed by federal laws in the area of securities sales were revived in this situation.

All sorts of bad things happened. Crooks would buy homes with faulty seller financing documents so sellers could not foreclose if they were not paid by the buyer, while at the same time they remained obligated on the mortgage which the buyer might choose not to pay. Companies were formed that bought real estate on seller financing, then just stripped the property of everything of value and left the barren property for the sellers to foreclose upon.

Seller financing deals could be structured to protect the seller, but there is always a portion of the population that does not consult a lawyer before entering into a transaction of this sort. It is this group around which financial vultures circle.

There was nothing of the magnitude of the massive systematic fraud of recent years, so the legislature was relatively slow to address the problem of equity skimming. In 1988 Washington passed a law that criminalized equity skimming and declared it to be a violation of the Consumer Protection Act. The forward to the bill states in part:

The legislature finds that persons are engaging in patterns of conduct which defraud innocent homeowners of their equity interest or other value in residential dwellings under the guise of a purchase of the owner’s residence but which is in fact a device to convert the owner’s equity interest or other value in the residence to an equity skimmer, who fails to make payments, diverts the equity or other value to the skimmer’s benefit, and leaves the innocent homeowner with a resulting financial loss or debt.

Financial institutions had their hands full in the 1980’s. Seafirst Bank, the biggest bank in the Northwest was going bankrupt until it was purchased by Bank of America. Other big banks swallowed smaller ones into the nineties. Two of the biggest Seattle banks, Peoples Bank and Old National Bank, were bought by U.S. Bank of Oregon and merged into U.S. Bank of Washington. This activity seemed to occupy attention much more than occasional fraud on homeowners.

The opportunity for homeowner fraud errupted like never before during the Bush Administration. The administration’s laizes faire, anti-regulation bias allowed this situation to reach international economic crisis proportions, despite obvious abuses all along the way. (The policies that created the situation were constant between Clinton and Bush, but Bush’s response to the financial crisis made Katrina relief look adequate and timely.)

The subprime era was awash in home loan money; lenders could hardly give it away fast enough. Home loans were obtained without a great deal of review for as much as the full purchase price of a home. This was like a petri dish for raising a culture of financial fraud.

People were so eager to get at the money there were numerous seminars given on equity skimming. Small fortunes were made on the price of admission alone. These week-long seminars were packed with local real estate people, real estate agents, brokers and miscellaneous others. People from Seattle, Everett, from all over the Western part of the state attended.

Recently indicted Charles Head (California based) advertised on the internet, sent faxes to mortgage brokers and people in the real estate industry and nurtured relationships with lenders and escrow companies. He had dozens of companies that were nothing more than names to confuse the public. Sometimes the companies described themselves as facilitators, sometimes as lenders, sometimes as lenders’ agents, sometimes buyer’s agents, sometimes both lender and buyer’s agents and often not at all.

Don’t Buy Foreclosed Property From Dirty Lenders

There is a hidden risk in buying foreclosed property that nobody seems to be talking about.  Many of the houses being foreclosed upon were subjected to liens securing sub-prime loans.  Many of these loans were made by disreputable lenders, sometimes by now indicted loan officers.

In Washington, like many other states, the purchaser at a foreclosure sale takes the title that existed at the time that the loan was made and the deed of trust recorded.  If the lender had nothing to do with any deceit on the owner and was not on notice of any irregularity, then the lender is deemed a “bona fide purchaser for value.”  This is a legal term meaning that title cannot be recovered by the owner, even if there was fraud.  When the lender was involved in the fraud or had reason to know of it, then the owner can clear title of the deed of trust and the ownership interest of the purchaser at the foreclosure sale.

Thus, a truly prudent buyer at a foreclosure sale or purchaser from a bank after foreclosure should check to see which lender made the loan originally.  Only after finding out about that lender can the purchaser have comfort that title cannot be reclaimed by a defrauded or deceived owner.

A Victim of the “Foreclosure Crisis”

For many of the people in our community in the Northwest the “foreclosure crisis” is not an exercise in economic theory or a lame talking point. To some degree we have all been affected by the recent financial crisis which involves the selling of consumer mortgage debt as if it were a security. The billions of dollars that are washing around banks and investment firms and pouring out of our federal government to solve the crisis give us a notion of the scope of the problem. But that is all so theoretical seeming.

Over the last few years in the consumer lending industry there has been a frenzy not at all unlike the one that gripped our area 110 years ago. In the 1890’s the Puget Sound area experienced a boom driven by the rush to riches in Alaska. Timber was needed on a large scale, outfitting, shipping. This was the staging area for the search for gold in Alaska. At the same time wood was needed to rebuild Tokyo and logs could hardly be taken down fast enough. Coal then was found and mined in Eastern King County. People here were getting rich fast.

With our frontiers pretty much explored and exploited, the vast timber reserves gone, we discovered that our growing number human resources were not just a labor force but a potentially rich field for financial exploitation. Traditionally the home loan market has been relatively stable. Everybody want to buy a house and the average home is occupied about seven years before it is sold again.

The savings and loan scandal during the Aust years of the Regan administration was tremor of instability in which the relatively unregulated savings and loan industry was found to be exploiting home buyers and investors. It was quelled with federal money and added scrutiny. While it devastated many people scope of the problem was relatively confined. Here a few savings and loan institutions disappeared (anyone remember Shoreline Savings and Loan?) and a few real estate agencies were hurt.

That paled in comparison to what happened more recently. A few years ago people decided that mortgage loans could be bundled and sold on the open market. Investment banking firms could buy and sell these things. For a long time banks had been making home loans and selling them to quasi government institutions, Freddie Mack and Sallie Mae. Suddenly there was a new market for these instrument and far greater demand than ever. Not only that but this new makrket was largely unregulated. Banking has been highly regulated since the Great Depression of the 1930’s but investment banking was pretty much wide open. When banks had only Sallie Mae as a buyer of their home loans, all the home loans had to meet rather strigent requirements, but with new buyers in the field those requirements could be fudged. This new demand also allowed lending institutions that were not national banking associations to sprout up all over.

The federal reserve cooperated by keeping interest rates low so that money for buying homes could be obtained relatively cheaply. A set salary could afford the monthly payments on a higher debt with lower interest rates. This was magnified by the now well established custom of married couples both working. The housing industry boomed, the building industry boomed and house prices soared.

This caused the proliferation of what had been a rather quiet industry: mortgage brokers. With interest rates low and all sort of different lending program, a broker could be very helpful in finding a good deal. Everybody made money by closing deals. The mortgage broker made money when the loan closed, as did the real estate agent and the lender. The lender made more money when it sold the loan to a bundler who made money when the bundle was sold and so on down the stream of finance.

Around here people were now more plentiful that the forests that they had replaced and we began profiting on each other with the frenzy of a gold rush. This was of course a national phenomenon and often the loan was made by a far away lender but we were certainly on the front end of this financial sunami.

Somewhat ironically greed seems to flourish best when money accumulates. It must have to do with oppotunity. At any rate significant segments of our community sttod to profit by getting loans to close. Even the lenders were not motivated to make sound loans becasue they were just selling the paper upstream. Big profit depended on large vloume.

I’ve recently met a few people who were sucked into this vortex of greed and induced to obtain mortgage financing. I’ll tell you about one of them. Nancy was a retired widow who wanted to buy a small home in the Redmond area but everything seemed too expensive, even the modest homes that she desired. She met a nice lady in a senior singles group who worked as a mortgage broker who told her that she should not be put off by the price. Instread she should look at the amount of the monthly payments and she should gage what she could buy by the amount she would have to pay each month. Prices increased quickly enough that she should view the payments as an investment because when she sold she would make a lot of money on th eequity she built up.

This made sense to Nancy so she decided to at least have a real estate agent show her some houses. They found a modest house and the real estate agent assured her that it was an excellent investment; houseswere going up in price so much that she could always sell the house without any trouble and after a year or so sell it at a profit. Nancy did not want to sell the house but this did give her comfort. She went back to her “friend” the morgage broker who said that she was getting a great deal on the house and that if Nancy did not buy it she would.

When Nancy asked about financing she was told that the payments would be about $1,300 per month. This was a bit of a stretch but something that she could afford. The broker ran off some numbers and printed a page showing that her payments would come to $1,334.50 each month. She was told that by renting the basement (which could be used as a stand alone aprtment) she could easily afford this. Nancy then signed a purchase agreement and went back to the broker who asked her to sign a poan application. She got a call a few days later from the mortgage broker who told her everything was ok and she would receive the loan. She then waived the financing contigency and was locked into buying the house.

Before the closing she went to the borker’s office again and was told that everything went smothly, that she had to tinker with the application a little bit but it was no problem. A couple of days laterwent to the closing office at a title company to sign the papers. She overwhelmed by the stack of papers that awaited her there. The note that she had to sign was three single spaced pages and was utterly incomprehensible. The Truth in Lending sheet showed that the amount would increase over time but not over $1900. When she called her friend about this she was told that this would not occur for anumber of years and that it would be covered by the rent of the improved basement out and anyway she could always sell the house for a profit.

That was two years ago and now she has monthly payments of $3,900, which she cannot afford to make. Foreclosure has been commenced and the house has been listed for six months without an offer. When the foreclosure is completed she will have lost her down payment of $100,000 and installment payments totaling about a third of that. The truth in Lending discloures were false, but the subprime lender that made the loan is long gone and bankrupt.

There are many people in Nancy position, truly victims of unscrupulous lending practices. I rankle when the “foreclsure crisis” is blamed on greed-driven consumers. Most victims are just people who were not very sophisticated and whose fault was misplaced trust.

McCain on the Mortgage Crisis is a Reactionary

Would someone explain to me the difference between Herbert Hoover or Calvin Coolidge and John McCain. Hoover of course focused his attention, such as it was, on keeping business free of regulation. His “just wait and see” approach saw us into the Great Depression.

There are two very obvious fiscal problems facing us now: the cost of the war and the mortgage crisis. His answer to rapidly broadening deficit created by the war is to say that we will continue it for 100 years if we have to and he will lower taxes for the middle class. This so called straight talking maverick promises even greater deficit spending on war, as I understand it, and no end in sight. He has no answer for the burden this puts on our economy as more and more of our money is spent just servicing the debt created by five years (an counting) of war. (Remember that one of our stategies when the Soviet Union invaded Afghanistan was to foment radical Islam so that so the fight could continue long enough to bankrupt the Soviet Union. Why are we immune from this?)

While accepting a downward spiral of national debt, McCain said that irresponsible homeowners are getting their just desserts when 4 million of them are facing foreclosure. He further suggested that the ones in trouble are the people who refuse to get second jobs. He did suggest that we might consider giving consumers more Truth in Lending disclosures, a proposal that he voted against a few months ago and one that everyone (including McCain a few months ago) acknowledges would be of no meaningful assistance in the current crisis and unlikely to avoid similar problems in the future. He did come out though in favor of bailing out financial institutions which bought heavily into bad mortgages if their troubles presented a “systemic” threat.

This mortgage crisis is serious. It, according to the Economist, involves 1.1 trillion dollars. McCain seems to be saying “Wake me up if our system starts to collapse.” The Economist, which was taken seriously by Republicans before the party was hijacked by ideologues, suggests that regulation is appropriate, that a systemic fix is in order as unregulated investment banking presents a risk of serial bailouts. It also suggested the government might buy some of the subprime debt because it could be acquired at a fire sale discount. The government could then work with the home owners and might very well profit be the investment.

Isn’t McCain proposing that we do exactly what we did in the late 1920’s?

Clinton’s “Populist” Proposal Finds Support with The Economist.

Among Clinton’s proposals for the current mortgage crisis is her endorsement of the bill sponsored by Barney Frank and Christopher Dodd, which would give the FHA the ability to guarantee and purchase high risk mortgages. Obama alludes to better regulation. Mr. McCain’s approach seems to be “I think the crisis over. Let’s wait and see.” The Economist is much less laizes faire than Mr. McCain and recommends a couple of the Democrats’ suggestions. It suggests that this might be a good opportunity for the government to buy assets of limited marketability at a big discount, as suggested by Clinton. In line with Obama it says that bailouts of badly run investment banks must come with strings attached in the form of regulatory control to reduce the likelihood of further need for public support.

McCain, I think, in just furrowing his brow and urging restraint is losing whatever chance he has to show leadership in this crisis. As Clinton noted, the circumstances call for something more than platitudes mouthed by Herbert Hoover. The economy is certainly going to be a central feature of the campaign this fall, so why has McCain conceded initiative to the Democrats?

This mortgage crisis is not a trivial matter. The Economist estimates that the loss will be about $1.1 trillion, significantly more than the savings and loan scandal.

The Mortgage Crisis: a Campaign Issue on Which Clinton Steps Forward

As we come down the home stretch in the primaries, Clinton may be hitching her wagon — at least in part — to the mortgage crisis. It was my impression that because of her stance on the war and her association with the conservative social policies of her husband, she lost much of the support from the left. Over the campaign she has moved her position on the war so as to try to make it indistinguishable from that of Obama. (At least according to their websites there is actually a rather clear difference between the two with Clinton wanting to keep permanent military bases in Iraq with attendant commitments and she all but authorizing an attack on Iran by voting to designate part of its army a terrorist organization.) During the campaign she has also distanced herself from the domestic policies of her husband by increasingly appealing to populist sentiment.

This approach has crystallized in her proposals with respect to the mortgage crisis. She has proposed that a $30 billion fund be created to assist homeowners in crisis and is clearly approaching this from the mortgage consumer side. She proposes a 90-day moratorium on foreclosures and would freeze the interest rate on adjustable rate subprime loans. This should play well in industrial states with upcoming primaries.

Clinton has seemed to be generally consistent in this regard. At least since August she has focused on the need for consumer relief while Obama has emphasized the need for regulation of the industry. Since Edwards left the race she has adopted some of his proposals (this is part of her move to the left) in advocating a moratorium and freeze on subprime interest rates. To further buttress her populist confides, Clinton borrowed from Barney Frank and Christopher Dodd in recommending that the Federal Housing Administration be given enhanced power to oversee and perhaps to guarantee or purchase defaulted loans.

Obama is clearly fixed toward the center, advocating a conservative response to the crisis. He now proposes a smaller fund for homeowners ($10 billion) and offers a lot of talk about restraint and vague talk about regulation.

On this issue Obama and McCain appear to be closer to each other than either is to Clinton, although Obama certainly sees himself as closer to Clinton than to McCain.