Congress Falls Short in Addressing Foreclosure Crisis
By Brian Clappier, Community Investment Specialist
Home is where the heart is, so the saying goes, and for many Americans, it is also where the majority of their assets lie. Unfortunately, as home foreclosures rose by 78 percent in 2007 to 1.77 million, with another 3 million expected to go into default by mid-2009, this year is proving itself calamitous for the hearts, homes, and assets of many Americans. Amid this foreclosure tsunami, Congress has still not taken substantive action.
Senate compromise leads to empty legislation
Senate leaders recently came to a compromise on the bipartisan Foreclosure Prevention Act of 2008 (S. 2636). Although the bill passed by an 82-to-12 vote on April 10, even its top sponsors, Sen. Harry Reid (D-NV), and Senate Banking Committee Chairman Christopher Dodd (D-CT), recognized that this bill is little more than a “step in the right direction.” More action is needed to help those facing foreclosure.
The Center for Responsible Lending recently issued a joint statement warning that the legislation lacks the single most-needed step for families to keep their homes: a bankruptcy amendment allowing judges to adjust loan terms. Moreover, it is “a bill loaded with special considerations for mortgage companies and builders that does very little for homeowners who were sold predatory loans by mortgage lenders.” A full copy of the joint statement can be found here.
Promising Proposals in S. 2452, HELP Now
Essential additions to current legislation include massive refinancing mechanisms and modifications of abusive loans, bankruptcy law reform to allow judges to modify subprime and nontraditional loans, and comprehensive consumer protection measures against predatory lending. Such a bill exists in Senator Dodd’s Home Ownership Preservation and Protection Act of 2007 (S. 2452).
The National Community Reinvestment Coalition (NCRC) has also proposed strong measures in the HELP Now program. Under the program, the federal government would strike a balance between assisting homeowners and ensuring that lenders, servicers, and securitizers are not rewarded for predatory lending by offering to purchase loans held in securitized pools at a discount. Once purchased, the loans could be refinanced or modified to create long-term affordability.
The time has come to defend American homeownership, and the Shriver Center urges Congress to support the provisions of S. 2452 and HELP Now. For more information on current legislation dealing with the foreclosure crisis, contact Dory Rand at 312.368.2007 or Brian Clappier at 312.263.3830.
Tags: Foreclosure
June 4th, 2008 at 6:32 pm
A new report released by First Focus, which can be found at http://www.firstfocus.net/pages/3401/, reveals that an estimated 2 million children will be directly impacted by the subprime mortgage crisis as their families lose their homes due to foreclosures. As the first comprehensive analysis of how the crisis will impact kids, the report explains that this number will rise even higher when accounting for other populations, such as children being evicted from rental units that are going into default and those children whose parents default on conventional loans. These foreclosures will happen primarily during 2008 and 2009.
In addition, the report finds:
* Due to the increasing number of foreclosures, school districts across the country are experiencing increases in the number of homeless children entering their classrooms;
* Children impacted by the mortgage crisis are likely to experience excessive mobility and as a result are only half as likely to be proficient in reading as their peers. Moreover, they are much more likely to be held back and eventually drop out of school;
* Children forced from their homes experience behavioral problems, such as increases in violence;
* The physical and mental health of displaced children can be severely compromised, as families losing their homes are less likely to have money available for items such as health care and health insurance.
June 10th, 2008 at 12:58 pm
There does not seem to be as much urgency concerning the enormous loss of homes, particularly since the international credit crunch aspect of the crisis has eased. Perhaps this is because of the election cycle, gas prices, the war and the economy, as well as a tendency in many quarters to blame the victim borrowers. More attorneys are involved in defending and mediating foreclosures, but the numbers are dwarfed by the size of the problem, and industry remains in charge of the pace and extent of any relief. Attorneys can contribute to the solution by keeping the pressure on the parties with the power to fix the problem, who are usually “downstream” from the originating lenders and brokers who made the loans. Yesterday I saw an article where the sheriff in Philadelphia proposed to stop holding foreclosure sales. That probably won’t hold up legally in the long run but it is the kind of urgency that may convey to the industry and politicians that the extreme loss of low and middle income home wealth, and the accompanying consequences to families, are not acceptable.
June 26th, 2008 at 12:39 pm
When capital is misallocated as happened when the government encouraged and sponsored mortgage loans for people who could not afford them the result is always a financial upheaval. To think that tax money can fix the problem so no one suffers a loss is fantasy. Overdue bills always get paid. In this case it is the middle class tax payer that will be forced to shoulder the burden. That’s not much of a solution.
August 6th, 2008 at 5:38 am
subprime mortgage leads…
It sounds interesting but I am not sure that I agree with you completely….
August 15th, 2008 at 9:42 am
consequences of foreclosures…
Found it very useful….
September 21st, 2008 at 7:46 am
Jessie…
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