Congress Taking Swift Action On Foreclosure Crisis

Posted on November 28th, 2007 by saman

As predictions of housing gloom and economic doom proliferate, it is good to review just what steps have already been taken by government and which others are still in the works. These have been well covered in the press over the past several months, but were recapped by House Speaker Nancy Pelosi today at the U.S. Conference of Mayors in Washington, D.C. Here’s a summary:

Reforming the FHA to expand American home ownership: The House passed a bipartisan bill that will enable the Federal Housing Administration to serve more subprime borrowers with affordable rates and terms; take back borrowers that turned to predatory loans in the past several years; provide opportunities for loan refinancing to borrowers having troubles meeting their mortgage payments. There are also provisions to protect future borrowers through anti-predatory lending legislation that makes sure borrowers get mortgages they can really afford.

Ending taxes on Mortgage debt forgiveness: The House also passed another bi-partisan bill that will end the taxes on phantom income when a lender forgives any part of a mortgage in foreclosure. Under current law, that portion forgiven would be taxable and become just one more liability around the neck of foreclosed homeowners.

GSE Reform making Fannie Mae and Freddie Mac part of the solution: The House has passed comprehensive, bi-partisan GSE legislation that improves the regulation of Freddie Mac and Fannie Mae and the Federal Home Loan Banking System. This bill increases GSE loan limits for single family homes in high cost areas so that these groups can purchase additional loans and thereby lower interest rates for both new homes and refinances.

The Housing Committee to Prevent Foreclosures: Legislation passed by the House calls for investing $200-million for counseling services to distressed homeowners who are caught-up in unaffordable loans.

Affordable Housing: The House also passed legislation that establishes a national affordable housing trust that will build or preserve 1.5-million homes and apartments during the next 10 years without any increase to the federal deficit. More affordable housing will aid families who have lost their homes due to predatory lending or a financial crisis such as bad health or a job loss,

PENDING: Fairer treatment for Bankrupt Homeowners: The House Judiciary Committee is now considering legislation that will prevent as many as 600,000 more Americans from losing their homes in bankruptcy over the following two years by allowing bankruptcy judges to revise mortgage contract terms and thus giving homeowners more time to pay their mortgages.

The actions already taken and the one pending are evidence of government’s intention to provide real-time help to those who need it most and to take firm steps to prevent this kind of crisis from occurring in the future. In addition to these federal actions, many individual state governments and community groups are working hard to enact similar legislative help on the state and local levels in their jurisdictions.