Foreclosure Prevention Bill Faces Hurdles
While foreclosure worries continue to plague American homeowners, lawmakers keep searching for solutions to the current crisis in the housing market. But not everyone in the legislative branch of government is on the same page about what's best for the economy and those facing foreclosure.
The Foreclosure Prevention Act of 2008 is the latest bill drawing attention from media outlets. The bill contains several provisions for easing the strain of foreclosures, including funding for foreclosure counseling groups like Neighborworks America, programming allowing communities to fix up and rent out foreclosed-upon properties and modifications to bankruptcy law that would allow courts to modify mortgages during bankruptcy proceedings.
Senator Harry Reid (D-NV), Senate Majority Leader and sponsor, has demonstrated vigilance in supporting and promoting the bill, according to AllAmericanPatriots.com. After hearing of Bush's plans to veto the bill on the recommendation of his financial advisors, Reid reportedly penned a letter to the president encouraging him to ignore such advice.
The letter addresses several concerns of the bill's opponents, outlined here:
Advisors' Concern |
Reid's Response |
Mortgage modifications in bankruptcy court would hurt mortgage lenders, discourage homeownership. |
Bankruptcy law already permits modification of other loans (including those for second homes and boats), so this wouldn't be too much of a stretch. Also, modifications have been made to limit mortgages eligible for modification to ARMs and subprime loans already issued. Further, a study conducted at Georgetown law found that the effects of modifications similar to those permitted in the modified bankruptcy law would have a negligible, if any, effect on the mortgage market. Lastly, lenders have an opportunity to recover some losses if and when borrowers decide to resell their homes. |
Organizations like Neighborworks America would be unable to handle the funds pumped into them by this bill. |
Reid cites his observation and experience here, insisting that Neighborworks America's response in Nevada (his home state) was phenomenal under HOPE NOW. He notes that he's found foreclosure counseling organizations eager for more funding and ready to help more struggling homeowners. |
Plan to have communities renovate foreclosed-on properties would amount to little more than a bailout. |
Reid quotes estimated effects of this part of his plan, predicting that community ownership of foreclosed-on properties would not only preserve neighborhoods and prevent property devaluation, but would also help 700,000 families, put 80,000 vacant and foreclosed-on properties to use and create $10 billion in economic activity. |
Reuters reports indicate that discussion of the bill was pushed back by Iraq concerns and then blocked altogether by Senate Republicans. The upcoming weeks should prove interesting for this and similar legislation, as Senators like Dick Durbin (D-IL) and Harry Reid seem bent on giving relief to American families through legislation.