February 14, 2008
Nevada Senator Harry Reid today joined Senate Democrats in announcing 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.”
Senate Democrats introduced the Foreclosure Prevention Act of 2008 to:
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.
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.
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.
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