ANOTHER LAW WITH NO TEETH
WASHINGTON, DC – In an “effort” to curb record-high foreclosure rates across the country and stabilize the housing market, U.S. Senator Jack Reed today introduced legislation that will help keep families in their homes and prevent communities from deteriorating as a result of skyrocketing mortgage defaults. Reed’s Preserving Homes and Communities Act of 2009, cosponsored by Senators Dick Durbin (D-IL), Sheldon Whitehouse (D-RI), and Jeff Merkley (D-OR), will help address the housing crisis by requiring that qualified homeowners are evaluated for and offered loan modifications; establishing a new mortgage payment assistance program; and incentivizing states and local governments to create strong mediation programs, which allow homeowners and servicers to meet face to face to try to find an alternative to foreclosure.
“In the last year, the federal government has taken decisive action and devoted substantial financial resources to shoring up financial markets, averting a potential national and global financial meltdown. Despite federal efforts, the number of foreclosures continues to rise at an alarming rate on pace to surpass last year’s foreclosures by a third. The Preserving Homes and Communities Act will ensure that we are taking similarly aggressive actions to address the housing crisis, which has devastated families, crippled local communities, and dragged down the broader economy,” said Reed. “More and more households are finding that even with a fixed-rate mortgage that they could afford before the recession, they are just one pink slip away from losing their biggest investment. My bill provides targeted relief to qualified homeowners so that more families can keep their homes, protects communities from suffering even greater financial losses, and sets us on the path to stabilizing the housing sector as a foundation for lasting economic recovery.”
Moodys.com suggests that the number of mortgages in default could rise to four million this year alone. According to the Mortgage Bankers Association (MBA), more than a third of the overall increase in the start of foreclosures in the second quarter was attributable to prime, fixed rate loans. And the number of homeowners at least one payment past due is more than one in eight—the highest level since the MBA began keeping track.
“As foreclosure rates continue to climb, a lasting economic recovery becomes harder to reach,” said Durbin. “Until we stabilize the housing market, we simply won’t get a handle on the broader economic crisis. Voluntary efforts to keep families in their homes have failed. This bill will force lenders to modify qualified mortgages, create a homeowners assistance program and give states a bigger role in mediation efforts. It’s long past time for the Senate to step up to keep families in their homes and to help lead the way toward economic recovery. This bill will help achieve those goals.”
“As I travel around our state, I often hear concerns from Rhode Islanders affected by our nation’s housing crisis,” said Whitehouse. “It is clear to me that Congress must do more to level the field for struggling American homeowners. Jack Reed has been a leader on this issue, and I’m proud to support this new legislation to help families in Rhode Island and across the nation to keep their homes.”
“Millions of American families continue to be at-risk of losing their homes due to the current economic crisis,” said Merkley. “The Preserving Homes and Communities Act of 2009 will encourage lenders to do right by homeowners in need and give states assistance to prevent further foreclosures. We must stem the tide of foreclosures that continue to wreak havoc on American families and local communities.”
The Preserving Homes and Communities Act of 2009 builds on Senator Reed’s requests to the Secretaries of Treasury and Housing and Urban Development urging the agencies to hold banks and lenders accountable for providing relief to qualified homeowners, by requiring lenders to make good on their promises to evaluate eligible homeowners and offer loan modifications to those who qualify.
The bill would improve the current loan modification program by expanding it to more qualified homeowners; giving these homeowners protection against all foreclosure proceedings while waiting for a loan modification analysis, not just against a foreclosure sale; and providing these homeowners with the legal tools to help save their homes when lenders fail to follow the program’s rules. It would also help establish state mortgage assistance programs nationally and encourage mandatory mediation programs.
The Preserving Homes and Communities Act of 2009 will:
Expand and Improve Loan Modification Programs and Rein in Costly Fees
• Requires lenders and servicers to evaluate homeowners for affordable modifications prior to initiating foreclosure, and offering approved modifications to homeowners if the net present value of modification is greater than that of foreclosure.
• Establishes meaningful penalties by making noncompliance a defense to foreclosure.
• Places limits on when foreclosure fees can be charged and prohibits costly mark-ups.
Provide Targeted Mortgage Payment Assistance
• Assists homeowners experiencing a sharp reduction in income through no fault of their own.
• Authorizes $6.375 billion in formula funding to states to create revolving loan funds to offer homeowners grants or subsidized loans.
• Requires states to carefully steward federal dollars by requiring programs to abide by commonsense guidelines such as evaluating applicants’ employment prospects and capping maximum loan amounts.
Encourage Strong Mediation Programs
• Authorizes $80 million in competitive federal matching funds for states and localities to establish mandatory mediation programs.
Establish a National Database on Foreclosures
• Authorizes $5 million for the Department of Housing and Urban Development, in conjunction with other agencies, to develop a single database that will enable better monitoring of mortgage markets.
Capitalize the National Housing Trust Fund
• Provides $1 billion for the building, preservation, and rehabilitation of affordable housing from the proceeds of the warrants provisions in the Emergency Economic Stabilization Act.