A proposal to halt the record number of foreclosures and force lenders to work with homeowners to modify mortgages was introduced in the Senate Wednesday by Rhode Island Senator Jack Reed. Rhode Island is one of the worst 10 states to be affected by the foreclosure epidemic.
The bill would establish a new mortgage payment assistance program to aid families under the threat of foreclosure. The legislation is sponsored by three additional senators as the Preserving Homes and Communities Act of 2009, and is intended to help address the housing crisis by requiring that homeowners are evaluated for and offered loan modifications by bankers.
The plan would also provide incentives to states and local governments to create mediation programs and provide for homeowners to meet face to face with banking representatives. It would provide $6.3-billion in funding to offer homeowner grants and subsidized loans and $80-million in federal matching funds to states and local governments damaged by the foreclosure epidemic.
A total of more than 10-million foreclosures are expected through just 2012 - as forecast by Housing Predictor - as the unemployment rate climbs and many homeowners are unable to make their mortgages. Real estate experts say that until the housing market is stabilized by reducing the number of foreclosures, a lasting economic recovery is difficult if not impossible to achieve.
Congress has attempted to stabilize the housing market through a first time home buyers $8,000 tax incentive, while the Fed and Treasury have worked to stabilize lending markets after the financial crisis came to a head more than a year ago. However, efforts to aid housing have encountered troubles, and only offered piece-meal solutions until now since no clear cut plan had been established to force lenders to work with homeowners seeking a resolution.
"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," said Reed. "The Preserving Homes and Communities Act will ensure that we are taking similarly aggressive actions to address the housing crisis, which has devastated families, crippled local communities, and dragged down the broader economy."
The proposal is expected to receive broad support in Congress. "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," said Reed.
"Until we stabilize
the housing market, we simply won't get a handle on the broader
economic crisis," said Senator Dick Durbin (D-IL), a co-sponsor of the
bill. "Voluntary efforts to keep families in their homes have failed.
This bill will force lenders to modify qualified mortgages, create a
homeowners assistance program and give states a bigger role in
mediation efforts. It's long past time for the Senate to step up to
keep families in their homes and to help lead the way toward economic
recovery. This bill will help achieve those goals."
Kevin Chiu is a reporter for HousingPredictor.com, which forecasted the foreclosure epidemic would develop into an economic recession and forecasts more than 250 local housing markets in all 50 states.