Hoping to curb record-high foreclosure rates across the country and further stabilize housing markets, U.S. Sen. Jack Reed (D-Rhode Island) introduced new legislation Wednesday aimed at keeping more families intheir homes and protecting communities against the deterioration brought on by still-skyrocketing mortgage defaults. Reed’s Preserving Homes and Communities Act of 2009 would mandate that all qualified homeowners be evaluated for and offered loan modifications. It would also establish a new mortgage payment assistance program and provide incentives for state and local governments to create mediation programs that allow homeowners and servicers to meet face-to-face and devise alternatives to foreclosure. The bill is cosponsored by Sens. Dick Durbin (D-Illinois), Sheldon Whitehouse (D-Rhode Island), and Jeff Merkley (D-Oregon). According to Reed, the national housing crisis has “devastated families, crippled local communities, and dragged down the broader economy.” “Despite federal efforts, the number of foreclosures continues to rise at an alarming rate, on pace to surpass last year’s foreclosures by a third,” Reed said. “More and more households are finding that even with a fixed-rate mortgage that they could afford before the recession, they are just one pink slip away from losing their biggest investment.” Moodys.com suggests that the number of mortgages in default could rise to four million this year alone. And according to the Mortgage Bankers Association (MBA), more than a third of foreclosure starts in the second quarter of 2009 was attributable to prime, fixed rate loans, with one in eight homeowners now at least one payment past due-the highest level since the MBA began tracking delinquency numbers. Durbin commented, “Until we stabilize the housing market, we simply won’t get a handle on the broader economic crisis.

Voluntary efforts to keep families in their homes have failed. This bill will force lenders to modify qualified mortgages. It’s long past time for the Senate to step up to keep families in their homes.” The Preserving Homes and Communities Act of 2009 builds on Reed’s requests to the secretaries of Treasury and HUD urging the agencies to hold banks and lenders accountable for providing relief to troubled homeowners. The bill would expand the government’s loan modification program to more homeowners and require lenders and servicers to offer approved modifications to all qualified borrowers if the net present value of modification is greater than that of foreclosure. It would give homeowners protection against all foreclosure proceedings while waiting for a loan mod analysis, not just against a foreclosure sale, and would make lenders’ and servicers’ noncompliance a legal defense to overturn foreclosure. Reed also wants to place new limits on when foreclosure fees can be charged and prohibit “costly mark-ups.” The mortgage payment assistance program outlined in the bill is intended for homeowners experiencing a loss of income “through no fault of their own.” States would receive a share of $6.375 billion in funding to states to create revolving loan funds to offer these homeowners grants or subsidized loans. The bill also authorizes another $80 million in federal matching funds for states and localities to establish mandatory mediation programs; $5 million for HUD and other federal agencies to develop a single, national database of foreclosures; and $1 billion for the National Housing Trust Fund to support the building, preservation, and rehabilitation of affordable housing.