Obama's Mortgage Plan Includes Low-Cost Refinancing, Subsidies

Here are the highlights of President Obama's plan to help troubled homeowners refinance and to reduce the number of foreclosures, obtained moments ago by The Post's Renae Merle:

-- The plan would provide access to low-cost refinancing for 4 million to 5 million homeowners so they could get better interest rates and reduce their monthly payments.

-- It would create a $75 billion "homeowner stability initiative" that essentially is a government subsidy meant to reduce monthly mortgage payments, meant to prevent houses from going into foreclosure. Here are the bullet points of this plan:

* A Shared Effort to Reduce Monthly Payments: For a sample homeowner with payments adding up to 43 percent of his or her monthly income, the lender would first be responsible for bringing down interest rates so that the borrower’s monthly mortgage payment is no more than 38 percent of his or her income. Next, the initiative would match further reductions in interest payments dollar-for-dollar with the lender to bring that ratio down to 31 percent. If that borrower had a $220,000 mortgage, that could mean a reduction in monthly payments by more than $400. That lower interest rate must be kept in place for five years, after which it could gradually be stepped up to the conforming loan rate in place at the time of the modification. Lenders will also be able to bring down monthly payments by reducing the principal owed on the mortgage, with Treasury sharing in the costs.

* "Pay for Success” Incentives to Servicers: Servicers will receive an up-front fee of $1,000 for each eligible modification meeting guidelines established under this initiative. They will also receive “pay for success” fees -- awarded monthly as long as the borrower stays current on the loan -- of up to $1,000 each year for three years.

* Incentives to Help Borrowers Stay Current: To provide an extra incentive for borrowers to keep paying on time, the initiative will provide a monthly balance reduction payment that goes straight toward reducing the principal balance of the mortgage loan. As long as a borrower stays current on his or her loan, he or she can get up to $1,000 each year for five years.

* Reaching Borrowers Early: To keep lenders focused on reaching borrowers who are trying their best to stay current on their mortgages, an incentive payment of $500 will be paid to servicers, and an incentive payment of $1,500 will be paid to mortgage holders, if they modify at-risk loans before the borrower falls behind.

* Home Price Decline Reserve Payments: To encourage lenders to modify more mortgages and enable more families to keep their homes, the administration -- together with the FDIC -- has developed an innovative partial guarantee initiative. The insurance fund -- to be created by the Treasury Department at a size of up to $10 billion – will be designed to discourage lenders from opting to foreclose on mortgages that could be viable now out of fear that home prices will fall even further later on. Holders of mortgages modified under the program would be provided with an additional insurance payment on each modified loan, linked to declines in the home price index.

-- The plan also includes other proposals, such as a "cramdown" provision -- enabling judges to modify home mortgages without permission of the lender -- that require congressional approval.

Was the Japanese Finance Minister Drunk?

Anyone disappointed with U.S. Treasury Secretary Tim Geithner's performance last week should definitely check out (now-former) Japanese Finance Minister Shoichi Nakagawa's behavior at a Group of Seven press conference in Rome this past weekend.

Nakagawa announced plans to resign Tuesday after he appeared to have done a little pre-gaming before meeting with the media. Nakagawa later said he was not drunk, blaming instead an ill-fated mix of alcohol and cold medicine, according to
MarketWatch

Wathc the video

Loan Modifications and Other Credit Solutions – Forbearance and Legal Options To Mortgage Payment Problems

(Best Syndication News) As the unemployment rate spikes the need for loan modifications is on the rise. In some cases the bank may be limited in this process, but it may be worth a try if you are going to be behind on payments or delinquent. The bank may have sold the loan and is just providing services for the owner.

You can speak to a credit counselor certified by The Department of Housing and Urban Development (HUD) for free. Talk to these professionals about loan modifications before you talk to your bank. You can also contact a non-profit Consumer Credit Counseling organization.

1) Besides modifying a loan, there are some other things that can be done to save money. Contact your cable or satellite TV provider. In some cases the company may have a new plan available that can save you money. Contact the phone company and see if they have a better option. It doesn’t cost anything to call. In some instances credit card companies will lower your rate.

2) Take a good look at your finances. Figure out how much money you are paying out and write it down. Create a log of your payments. Determine the difference between your income and your expenses.

3) Prepare an initial proposal to the bank. This could open the door to a negotiation. A counselor may also help you negotiate with lenders.

Loan Modifications

If you have an adjustable rate mortgage that is getting ready to reset and you are certain that you can not pay the monthly payments, you can request a loan modification. They will likely ask you for a complete financial history. The bank may be able to create a fixed rate solution for you.

If the lender does not modify the loan permanently, they may be able to lower your interest rate for a limited time. For instance, if your rate was going to jump to 10 percent, you might be able to get a 7 percent fixed rate for 5 years. In some rare instances, banks could lower the principal amount.

Forbearance

Forbearance means that the bank will temporarily suspend the payments. They might do this if you lost your job and have a new one starting in the near future. The bank may also consider this if you were hit with some medical bills or other emergency.

Don’t expect the bank to forgive your payments for more than a few months. The bank will want the payments to resume and the missed payments made up.

Legal Solutions

A legal challenge may be your last resort. If you are unable to negotiate with lender and there was a mistake or misrepresentation made in your loan, an attorney may be able to convince a judge to grant you a favorable decision.

Perhaps the lender did not disclose the Annual Percentage Rate (APR). The interest rate could be inappropriately high. Maybe the borrower was unaware that the mortgage will adjust upward (an adjustable rate mortgage ARM).

It is best not to wait until you are three months behind on your payments before you contact your lender. If you are granted a modification, make sure you make those payments. Check your credit reports for mistakes before you contact your lender.

Low oil prices are not translating into low gas prices

The economy is in tatters. Oil prices are plunging. So why are gasoline prices closing in on $2 a gallon again? The national average price for a gallon of regular gasoline was $1.97 Sunday, according to the Oil Price Information Service (OPIS) and AAA. That's up 22% since pump prices hit a five-year low of $1.61 on Dec. 30.

Oil prices, despite a Friday rally, have fallen about 16% over the same period.

A big reason for the disparity: refiners. Beset by weak consumer demand and losses on gasoline sales, oil refiners have scaled back production since late December. The average utilization rate at U.S. refineries was 81.5% as of Feb. 6, the lowest in 17 years, not including hurricane-related slowdowns, according to the Energy Information Administration. As recently as early December, refineries were running at 87.4% of capacity.

Refineries typically shut some units for maintenance this time of year. But many are trimming output because demand is anemic. That tends to rile consumers who view low gas prices as a small silver lining in a dismal economy. But go easy on the poor refiner, analysts say.

"If you're losing money on something and you're producing at 90%, you're going to cut back," says OPIS chief oil analyst Tom Kloza.

"If there's no demand, … there's really not a whole lot of point to making extra gasoline," says Bill Day, spokesman for Valero, the largest independent U.S. refiner.

Such cutbacks are common in other industries, Day says. Still, Kloza says, "They probably overtweaked it a bit."

But, Kloza says, that's likely because refiners didn't slash production enough the last quarter of 2008. Back then, while the global energy market — which sets crude prices — was weak, U.S. demand for gasoline was even more feeble. Wholesale gasoline cost several dollars less a barrel than crude oil, and refiners lost money on every gallon they sold. They offset their losses with profits on diesel fuel. Now, refiners are earning about $17 a barrel, says analyst Phil Flynn of Alaron Trading.

Another reason for the apparent disparity: While the nation focuses on benchmark oil prices, such as Nymex, other types of crude, such as Brent or Maya, trade about $10-a-barrel higher, Kloza says.

Don't worry yet about $4 gasoline. If high profit margins persist, refiners will ratchet up production, Day says. Kloza says gas prices likely will head toward $2.50 a gallon through March. But they'll soon stabilize and drift down again, Flynn says.

$787B stimulus bill near final passage in Congress

WASHINGTON (AP) — In a major victory for President Barack Obama, Democrats muscled a huge, $787 billion stimulus bill to the brink of final passage Friday night in hopes of combating the worst economic crisis since the Great Depression. Republican opposition was nearly unanimous. The vote in the House was 246-183 for the package of tax cuts and federal spending that Obama made the centerpiece of his plan for economic recovery.

The Senate was following suit in a roll call that was without suspense but extended into the night. That was to allow time for Democratic Sen. Sherrod Brown to fly back from Ohio, where his mother died earlier in the week. His was the decisive 60th vote for the bill.

Obama is expected to sign the bill soon.

Supporters said the measure would save or create 3.5 million jobs. House Majority Leader Steny Hoyer conceded there was no guarantee, but he said that "millions and millions and millions of people will be helped, as they have lost their jobs and can't put food on the table of their families."

Vigorously disagreeing, House Republican leader John Boehner of Ohio dumped a copy of the 1,071-page bill to the floor in a gesture of contempt. "The bill that was about jobs, jobs, jobs has turned into a bill that's about spending, spending, spending," he said. No House Republican voted for the measure.

The legislation, among the costliest ever considered in Congress, provides billions of dollars to aid victims of the recession through unemployment benefits, food stamps, medical care, job retraining and more. Tens of billions are ticketed for the states to offset cuts they might otherwise have to make in aid to schools and local governments, and there is more than $48 billion for transportation projects such as road and bridge construction, mass transit and high-speed rail.

Democrats said the bill's tax cuts would help 95 percent of all Americans, much of the relief in the form of a break of $400 for individuals and $800 for couples. At the insistence of the White House, people who do not earn enough money to owe income taxes are eligible, an attempt to offset the payroll taxes they pay.

In a bow to political reality, lawmakers included $70 billion to shelter upper middle-class and wealthier taxpayers from an income tax increase that would otherwise hit them, a provision that the nonpartisan Congressional Budget Office said would do relatively little to create jobs.

Also included were funds for two of Obama's initiatives, the expansion of computerized information technology in the health care industry and billions to create so-called green jobs the administration says will begin reducing the country's dependence on foreign oil.

Asked for his reaction to House passage of the bill, Obama said "thumbs up" and indeed gave a thumbs-up sign as he left the White House with his family for a long weekend in Chicago.

Congress cast its votes as federal regulators announced the closing of the Sherman County Bank in Loup City, Neb.; Riverside Bank of the Gulf Coast in Florida, based in Cape Coral; and Corn Belt Bank and Trust Co. of Pittsfield, Ill. That raised to 12 the number of failures this year of federally insured banking companies — the latest reminders of the toll taken by recession and frozen credit markets.

The day's events at the Capitol were scripted to allow Democratic leaders to fulfill their pledge to send Obama legislation by mid-February.

"Barack Obama, in just a few short weeks as president, has passed one of the biggest packages for economic recovery in our nation's history," said House Speaker Nancy Pelosi, anticipating final Senate passage.

The approval also capped an early period of accomplishment for the Democrats, who won control of the White House and expanded their majorities in Congress in last fall's elections.

Since taking office on Jan. 20, the president has signed legislation extending government-financed health care to millions of lower-income children who lack it, a bill that President George W. Bush twice vetoed. He also has placed his signature on a measure making it easier for workers to sue their employers for alleged job discrimination, effectively overturning a ruling by the Supreme Court's conservative majority.

Obama made the stimulus a cornerstone of his economic recovery plan even before he took office, but his calls for bipartisanship were an early casualty.

Republicans complained they had been locked out of the early decisions, and Democrats countered that Boehner had tried to rally opposition even before the president met privately with the GOP rank and file.

In retrospect, said White House chief of staff Rahm Emanuel, the White House wasn't "sharp enough" in emphasizing the benefits of the bill as Republicans began to criticize spending on items such as family planning services, anti-smoking programs and reseeding the National Mall.

Senate Majority Leader Harry Reid faced a different task — finding enough GOP moderates to give him the 60 votes needed to surmount a variety of procedural hurdles. To do that, he and the White House agreed to trim billions in spending from the original $820 billion House-passed bill, enough to obtain the backing of GOP Sens. Olympia Snowe and Susan Collins of Maine and Arlen Specter of Pennsylvania.

As the final compromise took shape in a frenzied round of bargaining earlier this week, it was trimmed again to hold the support of the moderates, whose opposition to a new program for federal school construction caused anger among House Democrats.

In the end, a compromise was reached that allows states to use funds for modernizing schools. But in a display of displeasure, Pelosi decided to skip the news conference last Wednesday where Reid announced a final agreement.

In addition to tax relief for individuals and businesses who purchase new equipment, lawmakers inserted breaks for first-time homebuyers and consumers purchasing new cars in an attempt to aid two industries particularly hard-hit by the recession. In response to pressure from lawmakers from Pennsylvania, Indiana and elsewhere, the bill was altered at the last minute to permit the buyers of recreational vehicles and motorcycles to claim the same break as those buying cars and light trucks.

In the House, all 246 votes in favor were cast by Democrats. Seven Democrats joined 176 Republicans in opposition.

$8000 First Time Homebuyer Credit

Congress is considering a package of items that are meant to boost the housing market nationwide. Many of my clients happen to be first-time homebuyers so one item in particular grabbed my attention. They are proposing an $8000 tax credit for couples and $4000 for individuals on your first home purchase. This is not a deduction, it is an actual $8000 reduction on your next tax bill. This will be a major motivation for renters that have been sitting on the fence of home-ownership. The credit program is designed to cover qualifying home purchases between April 9, 2008 and April 1, 2009. Some of the details we are waiting for include income restrictions and possible re-payment plans. Please let me know if you would like to be kept in the loop as more information unfolds

What can you do if you have bad credit?

What can you do if you have bad credit?

Why Analysts Keep Telling Investors to Buy

Even now, with the recession deepening and markets on edge, Wall Street analysts say it is a good time to buy.

Still.

At the top of the market, they urged investors to buy or hold onto stocks about 95 percent of the time. When stocks stumbled, they stayed optimistic. Even in November, when credit froze, the economy stalled and financial markets tumbled to their lowest levels in a decade, analysts as a group rarely said sell.

And last month, as the Dow and Standard & Poor’s 500-stock index suffered their worst January ever, analysts put a sell rating on a mere 5.9 percent of stocks, according to Bloomberg data. Many companies have taken such a beating in the downturn, analysts argue, that their shares are bound to bounce back.

Maybe. But after so many bad calls on so many companies, why should investors believe them this time?

When Internet stocks imploded in 2000 and 2001, Wall Street analysts were widely scorned for fanning a frenzy that had inflated dot-com shares to unsustainable heights. But this time around, credit rating agencies, mortgage companies and Wall Street bankers have shouldered much of the blame for the Crash of 2008, and few have publicly questioned the analysts who urged investors to buy all the way down.

“Analysts completely missed the boat again with the subprime and credit crises,” said Jacob Zamansky, a securities lawyer who represents investors. “They should’ve given some early warning signs to investors to bail out, or at least lighten up their portfolios. That warning never came.”

Instead, many recommendations urged investors to hold on to their shares, or double down, as the bloodletting worsened.

On Oct. 8, as Congress and the Treasury Department frantically tried to calm the plummeting markets, a Citigroup analyst upgraded Bank of America to buy. Since then, Bank of America shares have fallen 77 percent.

That same month, Jeffrey Harte, a top-rated analyst at Sandler O’Neill and Partners, also lifted Bank of America to buy, from hold, and a month later, he gave Citigroup the same upgrade, according to Bloomberg data.

“Our ratings are based on 12-month price targets,” Mr. Harte said. “Given the nature of economic cycles and, really, the focus of the new administration, I did expect and still do expect that the sector will improve considerably over the long term.”

With every wrenching decline, stocks seemed to be only better and better bargains to the most bullish market watchers, and their buy ratings seemed to reflect a hope that the market would soon turn a corner.

One analyst at Davenport & Company called the aluminum maker Alcoa a strong buy on March 24, Bloomberg data shows, when its stock was a buoyant $35 a share and commodities prices were rising. He then affirmed the rating 13 times as metals prices plunged, manufacturing dried up and Alcoa shares fell more than 70 percent.

“You can look back and say you were wrong as you go back and try to do a post-mortem on things,” said John Rogers, director of research at the market research firm D. A. Davidson & Company. “I don’t think there’s ever 100 percent accurate predictive expertise. I wish there was.”

In July, Mr. Rogers put a buy rating on Chicago Bridge and Iron, an engineering and construction company whose stock fell sharply during the first half of 2008. The rebound Mr. Rogers hoped for never came: the stock plunged 65 percent more.

Mr. Rogers said he did not expect oil prices, then hovering near $145 a barrel, to dwindle to $40. He did not expect Chicago Bridge and Iron to hit snags on British natural gas developments. And he did not expect such a broad economic downturn.

“If I had a rewind button and I could have done it, I would have downgraded on the day it peaked,” he said. “I was wrong on that, and I think any analyst would have to acknowledge that.”

In their defense, analysts point out that most regulators, economists, journalists and investors failed to foresee this financial catastrophe. And the worsening economy did prompt a cut in their buy recommendations.

Investors, for their part, may have simply been following the lesson that had been beaten into them time and again during the bull years of the last decade: buy cheap because the market will always go up.

“The market went up, up, up and up. You were rewarded for saying, ‘Don’t worry, be happy,’ ” said William A. Fleckenstein, president of Fleckenstein Capital, a money management firm in Issaquah, Wash. “Each time the market went down was a new opportunity to buy the stock even cheaper.”

When the storms of last year hit, few investors realized that this pattern would suddenly vanish, with disastrous results. “They didn’t understand the world they were operating in every year was a false reference point,” Mr. Fleckenstein said.

Still, the optimistic adage holds: the greater the fall, the greater the upside. Just give it some more time.

“Any analyst with a buy rating looks bad in a bear market,” said Anthony Polini, an analyst at Raymond James who rates banks. “This group is dramatically oversold. It’s down 75 percent. If you don’t have some strong buy ratings at this point, you’re doing a disservice to your customers.”

Mr. Polini, who has a strong buy rating on Bank of America, said it was a mistake to cut long-term outlooks for companies just because their stock price fell.

The actual investment recommendations coming from a sales desk can tell a different story from analysts’ publicly released research. To gauge what clients are actually hearing from their investment managers, the investment-tracking firm First Coverage collects buy and sell recommendations from about 1,000 analysts that serve independent and midsize firms.

At the end of January, 34.5 percent of the recommendations seen by First Coverage were for a sell or short call. That was up from 24 percent in December 2007. At the height of the market crash, in October and November, the proportion of sell calls reached about 45 percent.

In all of 2008, sells never outweighed the buys.

Why, even amid cascading losses, could not the majority of analysts simply slash a company’s rating to sell and tell investors to cut their losses?

“It doesn’t matter if you’re in a bear market, a bull market, a flat market, you’re going to get 95 percent of the research coming out telling you to buy,” said Randy Cass, chief executive of First Coverage. “It’s just the way it’s always been.”

Although reforms after the dot-com bubble sought to make analysis more independent by separating it from investment banking, the broader culture on Wall Street still favors bulls.

Some attribute the surplus of optimism to a widespread expectation that stocks — like home prices — will always increase in value over time. After all, the S.& P. 500 has posted annual returns of more than 9 percent during the last 80 years. Analysts did not want to hit the sell button just as the markets bottomed out.

How to escape the debt hole

Dallas —- The holidays are over, but for many consumers, the headaches are just beginning as the bills start to pile up.

Tackle them now because many experts say 2009 will be a tough year, especially for those who are debt-laden.

If you find yourself deep in debt, there are several options you can pursue.

One way is to handle the situation on your own. This requires you to have a harsh reality check and total up all your debts.

Create a summary sheet that lists the creditor, monthly payment, balance, interest rate and credit limit for each. List the status of each account, whether any bills are past due, and verify the payment due dates.

“This debt summary may be overwhelming, so prioritize which bills to pay first,” said Bill Hardekopf, chief executive of LowCards.com, a credit card information Web site.

If you can’t pay all of your monthly bills, first pay the bills that are necessary for health, shelter, food and basic transportation. Then pay the secured debts such as your car loan.

Payments on unsecured loans, such as most credit cards, should come last.

Contact your creditors to try to negotiate lower rates.

If you’re in danger of missing a payment, contact your creditors before you fall behind. Your card issuer may be able to work out a payment plan, lower your rate or lower your monthly payment.

Another option is to seek professional credit counseling. Reputable credit counseling organizations employ people who are trained and certified in budgeting and debt management.

Part of credit counseling may include a debt management plan, or DMP. In a DMP, you deposit money each month with a credit counseling organization. The organization uses these deposits to pay your debts according to a payment schedule it has worked out with you and your creditors.

“In a DMP, you pay 100 percent of the principal,” said Todd Mark, vice president of education at Consumer Credit Counseling Service of Greater Dallas. “The plan is to help you pay off your debt in full.”

His agency charges a one-time setup fee of $30, with monthly fees ranging from $12 to $24, “depending on the number of creditors we’d be sending money to.”

Get a detailed price quote in writing, and ask specifically whether all fees are covered. If you can’t afford the fees, ask if the credit counseling firm will waive or reduce them.

Look for an organization that offers a range of services, and counselors who are trained and certified, advises the Federal Trade Commission.

“Avoid organizations that push a debt management plan as your only option before they spend a significant amount of time analyzing your financial situation,” the FTC said. “DMPs are not for everyone.”

Undergoing credit counseling shouldn’t hurt your credit score, according to Fair Isaac Corp., which created the widely used FICO score.

You could also try taking out one loan to pay off all your debts. Then you make one payment a month to pay off the loan, which typically carries a lower interest rate.

“The consolidation of debt is just the first step of a two-step process,” said Greg McBride, senior financial analyst at Bankrate.com, a personal finance Web site. “Without the all-important follow-through of actually stepping up repayments of the debt, a consolidation does nothing more than just move money around.”

So make extra payments each month to pay the loan off sooner.

If you don’t have anything, such as home equity, to secure the loan, you may not get as low an interest rate. If you have bad credit, you may be denied altogether.

If you use your equity as collateral, you’d be exchanging unsecured debt for secured debt, with your home on the line.

“In this volatile economy, you should avoid borrowing against your home equity to consolidate debt,” said Ted Beck, president and chief executive of the National Endowment for Financial Education. “Your home could potentially devalue as a result of the soft housing market.”

If you get a consolidation loan, change your spending habits, or else you’ll be in a deeper hole than you were before.

As a last resort, you can consider debt settlement, which typically involves a company negotiating a settlement with a client’s creditors for a portion of the debt.

Debt settlement companies help consumers by lowering the amount they owe and reducing the time it takes to repay their debts, said Jack Craven, president of Debt Settlement USA in Scottsdale, Ariz.

He said his company settles clients’ debts for an average 40 to 60 percent of their outstanding balances.

One note of caution: Paying less than the amount owed probably will be reported to the credit bureaus as some version of “not paid as agreed, which likely will lower the person’s FICO score,” said Craig Watts, spokesman for Fair Isaac.

Demand to know in advance all fees a debt settlement company will charge for their services, and get this in writing.

The debt settlement industry has drawn the attention of state and federal officials in recent years, with state attorneys general bringing several enforcement actions against companies.

Auto insurance fines out of line

Gov. Jennifer Granholm's consumer advocate says insurance companies shouldn't profit from unaffordable auto premiums.

And state government? That's apparently a different matter.

There is little doubt that in these bad economic times, hundreds of thousands of Michigan motorists are breaking the law by driving uninsured vehicles. In Michigan, insurance is compulsory. And if you don't insure your car, you'll be fined.

But facing a budget crunch after taking office in 2003, Granholm cut a deal with lawmakers to impose added penalties, called "driver responsibility fees," for various offenses.

The idea was to discourage dangerous driving and bring in millions to state coffers at the same time. The fees generate more than $110 million annually, though if the state collected income taxes at the rate it collects these fees -- about 50-percent of the amounts assessed -- Michigan would be in receivership.

Some of the fees could be justified in that they impose stiffer penalties for dangerous criminal behavior on the road such as drunken or reckless driving, offenses which carry fees as high as $1,000 a year for two years.

Driving while intoxicated is the most penalized offense. The second highest category, according to a report last year by the Senate Fiscal Agency, is on the other end of the spectrum: driving an uninsured motor vehicle, nearly a quarter-million offenses in 2007.

The $200 fee charged for that offense can be half the cost of a bare-bones policy for the driver a jalopy with a clean driving record.

Now there are those who choose not to buy insurance because they'd rather spend the money on something else. Then there are those who -- when juggling rent, groceries and heating bills on a $10-an-hour job for which they have to have a car -- simply can't pay the premium.

How do they avoid insurance and still drive? In cities across Michigan, motorists can purchase a month of cheap insurance coverage that allows them buy a fresh vehicle registration tab. When the policy expires days later, they take the chance that they won't be stopped by the police in the next 11 months.

About a fifth of Michigan motorists are estimated to be without car insurance. Otherwise law-abiding, low-income motorists who do get stopped can soon find themselves ensnared in a costly legal trap that can take years to escape.

A motorist who can't pay at least a portion of that $200 responsibility fee within 60 days faces license suspension. Reinstating that license requires a separate $125 payment on top of what they already can't afford to pay.

What happens then? If they want to keep their job and need a car to do so, they drive not only without insurance, but with a suspended license. That citation invites still more driver responsibility fees, $500 a year for two years. As this new fee system has taken hold, offenses for driving with a suspended license have exploded, from 95,000 in 2005 to 138,000 in 2007.

Sen. Cameron Brown, R-Sturgis, has introduced legislation to eliminate the driver responsibility fees for driving without insurance or with an expired license. His bill would also establish an amnesty whereby motorists could arrange to pay 75 percent of what they owe within a two-month window. Other lawmakers want to see the whole fee system scrapped.

According to St. Joseph District Judge Jeffrey Middleton, it is "not uncommon in our court to see defendants who owe $5,000 to $10,000 to the state of Michigan. Unless they win the lottery, these people have little hope of ever regaining their lawful driving privileges."

Melvin Hollowell, a consumer advocate appointed by Granholm last year to examine the cost of auto insurance in Michigan, says Michigan should craft a low-cost premium option for low-income drivers with unblemished driving records. That would help. But it's not enough.
In last week's State of the State speech, Granholm said "we must do all we can to protect those who are hurting the most under the weight of this economic crisis."

A place to start would be for state government to stop hammering its taxpayers, uninsured motorists trying mightily to survive. Who are just trying to make it home to their kids after work, dodging crushing financial penalty all the way.