Senators Advocate Restructuring Foreclosure Programs and Processes
By: Joy Leopold
While both the House and Senate seem to have similar ideas – that changes in foreclosure prevention are needed, and fast – the groups seem to have completely different takes on how to achieve those changes.
This week members of a House subcommittee and committee reviewed proposals advocating for the termination of four foreclosure prevention programs, the Home Affordable Modification Program (HAMP), HUD’s Neighborhood Stabilization Program, the Federal Housing Administration (FHA) Refinance Program, and the Emergency Mortgage Relief Fund.
The House Financial Services Committee voted on Thursday to send two of the proposals, the ones for the FHA refi program and for the Emergency Mortgage Relief Fund, to the House for review.
At the same time, 18 senators led by Sens. Jeff Merkley (D-Oregon) and Olympia Snowe (R-Maine) sent a letter to several government agencies, urging them to modify the very programs the House will consider terminating, as well as urging them to address key issues surrounding the foreclosure process.
“We write you today to urge you to establish clear national regulatory standards for the loan servicing industry that eliminate confusion and barriers to mortgage modification and help keep families in their homes,” the letter began.
It continued, “We believe those standards should include establishing a single point of contact, ending the dual track of pursuing foreclosure during the loan modification process, and ensuring an independent third-party review prior to sending a homeowner to foreclosure.”
According to the letter, the lack of clear standards in the industry has hindered the success of the government programs.
That was a main argument in the termination proposals presented to the House committee this week, as well.
But rather than terminate the programs, Sen. Merkley suggested modifying the programs in a proposal of his own.
In his proposal, Merkley outlines a six-point program designed to strengthen the economy and prop-up the housing market, as well as help prevent foreclosures.
His plan is to:
• Bolster the market with a permanent tax credit for first-time homebuyers
• Assist families facing foreclosure through a national short refinance program
• Implement the “Lifeline Bankruptcy Option”
• Stop the “dual track” that continues foreclosure while loan modifications are evaluated
• Provide homeowners with a single point of access when they seek a loan modification
• Establish a third-party review prior to foreclosure and fully enforce existing law
Merkley is proposing a $5,000 tax credit in the year of purchase for first time homebuyers, which the homebuyer would need to match with a minimum $5,000 investment in down payment and/or closing costs.
Merkley also proposes a refinance program for underwater borrowers that would allow homeowners facing foreclosure to refinance their mortgages based on current rates and the current value of their house. The new mortgage would be a FHA-backed, 30-year fixed rate loan.
According to the proposal, the “Lifeline Bankruptcy Option” would allow federal bankruptcy judges to cover home mortgages when they adjust the debt of individuals who are going through Chapter 13 bankruptcy.
The other three options address issues many have pointed out as necessary components to ensure accuracy and legality in foreclosure proceedings.
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