On Thursday, Feb. 14, Senate Democrats announced legislation intended to address the national housing crisis and help Americans avoid foreclosure.
The Foreclosure Prevention Act of 2008 is intended to keep families facing foreclosure in their homes, help other families avoid foreclosures in the future, and help communities already harmed by foreclosure to recover.
This is another step in the right direction, according to Senate Majority Leader Harry Reid.
“We also want to ensure that this foreclosure crisis never happens again,” he said.
The new plan has several objectives and includes the following key sections (information provided below by Reid’s Web site):
Help keep struggling families in their homes
-- Increase pre-foreclosure counseling funds. This earmarks $200 million to help housing counselors continue their outreach to as many as 500,000 additional families at risk of foreclosure.
-- Allow housing finance agencies to issue bonds for refinancings. This will increase the current cap by $10 billion to refinance subprime loans, to provide mortgages for first-time home buyers, and for multifamily rental housing.
-- Change bankruptcy code to allow judges to modify mortgage of debtor. This could help more than 600,000 financially-troubled families.
Help communities harmed by foreclosures recover
-- Community development block grant funds for purchase and rehab of foreclosed properties ($4 billion). Homes that have been foreclosed and are sitting unoccupied on the market can sap neighboring homes of their value.
This provision allows communities with the highest foreclosure numbers and rates to access community development funds to use toward purchasing these properties, rehabilitate them if necessary and rent or re-sell them. This will stimulate economic activity and help prevent further loss of home equity in struggling neighborhoods.
-- Net operating loss carryback from finance stimulus package. For companies losing money in this economic downturn, “net operating loss (NOL) carrybacks” will be extended to five years from the two years currently in law.
Help families avoid foreclosures in the future
-- Simplified disclosure on mortgage documents. This measure would improve disclosures for both purchases and refinances. It would require firm disclosure of the terms of the mortgage within three days of application and not later than seven days before closing. In addition, the maximum loan payment would be disclosed, not only at application, but also seven days before closing.
-- Damages for mortgage violations would be increased from $2,000 to $5,000 per violation.
Senator Reid, D-Nev, did not indicate how long he thought it would be before this legislation, provided it is passed by both houses and signed by the President, takes effect or from where the funding would come.
It’s great to see the continuing introduction of legislation targeted at addressing the current foreclosure mess, as well as implementing procedures for avoiding foreclosures in the future.
Hopefully, if this legislation is enacted, it will help to restore the stability of the housing and mortgage markets in the not-too-distant future.
Mike Ferguson is with Windsor Financial Services located in Granite Bay. His Web site is www.windsorFS.com
