Washington, DC—Senate Democrats today announced a package of legislation intended to address the national housing crisis and help Americans avoid foreclosure. The Foreclosure Prevention Act of 2008 will keep families facing foreclosure in their homes, help other families avoid foreclosures in the future, and help communities already harmed by foreclosure to recover.
“Since last year Senate Democrats have been moving quickly to ensure more Americans will be able to stay in their homes and we have made some progress,” Reid said. “But in the face of an uncertain economy and with so many Americans struggling, we know that more needs to be done to address the housing crisis. The provisions we are announcing today is another step in the right direction and will help over 1 million people stay in their homes and help families and communities avoid foreclosure the future.”
Said Durbin: “Preventing foreclosures should be the primary means of stemming the mortgage crisis. Small changes to an outdated bankruptcy code could help over 600,000 at risk families keep their homes. That should be our goal. We should be giving families every reasonable tool to ensure they can keep a roof over their heads.”
“This package is aimed at the bullseye of our economic crisis – the housing market. If we really want to tackle the economic problems the country is facing, we must address the housing crisis that got us here,” Schumer said. “We need to apply the same bipartisan commitment to attacking the housing crisis that we had in putting together the economic stimulus package.”
Said Murray: “We are seeing communities in this country where people are literally abandoning their homes because they can’t afford their mortgages, and they can’t find a willing buyer. Homeownership has always been a sign of prosperity in our country. It should never be a trap.”
“The face of the economic crisis is the housing crisis, and the face of the housing crisis is the foreclosure crisis,” Dodd said. “I’ve been working rigorously to find solutions to the problems of rising home foreclosures and the devastating impact they have on families and neighborhoods across our nation. I’m pleased that some of these ideas, including increased funding for local governments to buy abandoned and foreclosed-upon properties, are part of this package.”
“But more needs to be done by the Administration, as well, to help people keep their homes,” Dodd continued. “I chaired a hearing just this morning with the top three Administration economic officials to discuss additional steps that must be taken to curb foreclosures and to get our nation’s economy back on track. I will continue working to that end, and welcome the ideas and insights of our Republican as well as Democratic colleagues both to maintain the American dream of homeownership and to keep our economy the strongest in the world.”
Said Reed: “The economy is slowing dramatically. We have a liquidity crisis and it is spreading from the housing market to other aspects of our economy. Now, from a national perspective, that is chilling. But when you sit around the family table, it takes on a much more immediate and consequential effect. The essence of our legislation is to deal quickly, effectively, and critically with this housing problem. We also want to ensure that this foreclosure crisis never happens again. So the legislation includes a provision I authored to set new disclosure standards for lenders that clearly spells out: what is the maximum payment involved in this mortgage. If there is going to be sticker shock, it should happen before the closing, not in the middle of the mortgage.”
Senate Democrats introduced the Foreclosure Prevention Act of 2008 to:
1. Help Keep Struggling Families in Their Homes
Increase pre-foreclosure counseling funds ($200 million). This additional funding will help housing counselors continue their outreach to families at risk of foreclosure. These added funds should assist as many as 500,000 additional families connect with their mortgage servicer or lender to explore options that will keep them in their homes.
Allow Housing Finance Agencies (HFAs) to Issue Bonds for Refinancings (increase current cap by $10 billion). This provision will allow housing finance agencies to use proceeds from mortgage revenue bonds to refinance subprime loans, to provide mortgages for first-time home buyers, and for multifamily rental housing. Additionally, the increased lending activity supports economic growth by creating new jobs, generating federal, state, and local revenues, and inspiring home-related consumer spending.
Change Bankruptcy Code to Allow Judge to Modify Mortgage of Debtor. This title could help more than 600,000 financially-troubled families keep their homes by allowing them to modify their mortgages in bankruptcy. It eliminates a provision of the bankruptcy law that prohibits modifications to mortgage loans on the debtor’s principal residence for homeowners who meet strict income and expense criteria. With this change, primary mortgages are treated the same as vacation homes and family farms.
2. Help Communities Harmed by Foreclosures Recover
CDBG Money 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 localities with the highest foreclosure numbers and rates access CDBG funds to use toward purchasing these properties, rehabilitate them if necessary and rent or re-sell them. Productive occupancy of foreclosed homes will help stimulate economic activity and help prevent further loss of home equity in struggling neighborhoods.
Net Operating Loss Carry Back from Finance Stimulus Package. For companies losing money in this economic downturn, this provision from the Senate Finance Committee’s reported stimulus bill extends a provision allowing corporations to apply excess net operating losses to tax returns from prior profitable years and receive any applicable refunds. For 2006 and 2007 losses, the “net operating loss (NOL) carryback” will be extended to five years (back to 2001) from the two years currently in law.
3. Help Families Avoid Foreclosures in the Future
Simplified Disclosure on Mortgages Documents. This provision would amend the Truth-in-Lending Act and improve the loan disclosures given to homebuyers not only when they apply for a home purchase loan, but also when they refinance their home. The measure would require: (i) firm disclosure of the terms of the mortgage loan within 3 days of application (and not later than 7 days before closing); and (ii) the maximum loan payment be disclosed, not only at application, but also seven days before closing. Finally, this provision would clarify that lenders are subject to statutory damages for violations of Truth-in-Lending disclosure provisions and increase the damages for mortgage violations from $2,000 to $5,000 per violation.