Senate Passes Foreclosure Bill Aimed at Helping Those with Risky Credit
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This morning, the Senate voted to pass housing bill that aims at helping to reduce the rate of foreclosure in this country. With foreclosures mounting again (following a moratorium over the holidays), government officials are scrambling to try to and do what they can to stem the tide of foreclosure and prop up the housing market. This is important to political leaders, since the housing market is considered an essential part of economic recovery. The new bill makes it easier for homeowners with risky credit to take advantage of a government program to help prevent foreclosure through refinancing and loan modification. The hope is that lower requirements will allow more people to take advantage of programs that can keep them in their homes.
The bill also expands an existing foreclosure prevention program, reports Foreclosure Warehouse:
The Senate housing bill would expand an existing $300 billion program called “Hope for Homeowners,” which persuades lenders to write down an individual’s mortgage if the homeowner agrees to pay an insurance premium. The program, which is set to expire in 2011, is intended to swap out a homeowner’s high-interest rate for a 30-year fixed loan backed by the Federal Housing Administration (FHA).
Congress is holding out hope that it will be able to help at least 400,000 troubled homeowners avoid foreclosure. Unfortunately, the fact that the programs are largely voluntary for mortgage lenders is slowing efforts to prevent foreclosure. Even with government incentives, mortgage lenders have been reluctant to engage in loan modification.
One thing that did not make in the bill was a provision to allow bankruptcy judges to reduce mortgage payments. Leaders have tried repeatedly to have this provision passed in various bills, but they are always blocked by the strong banking lobby. Obviously, mortgage lenders do not want to be forced into offering lower mortgage payments, much as credit card companies and other creditors are required to accept during bankruptcy proceedings.
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