Friday, March 06, 2009

Helping Families Save Their Homes Act

Yesterday, I voted for a key piece of anti-foreclosure legislation, the Helping Families Save Their Homes Act of 2009 (H.R. 1106). The bill passed the House by a vote of 234 to 191.

The Helping Families Save Their Homes Act will put in place a key first piece of President Obama´s comprehensive Homeowner Affordability and Stability Plan. I believe it will help a great many families in our community stay in their homes. Before I go too much further on this bill, I would like to urge those of you who are in trouble with your mortgage to visit to take an eligibility quiz for homeowners struggling to make their payments. It went live yesterday and should serve as a good first resource.

I have come to you each week for the last 6 months in this newsletter to talk to you about the dire economic situation we find ourselves in. The housing crisis is the root of the problem and until we stop the hemorrhaging we cannot hope to stabilize and rescue our economy.

On the floor yesterday, I told the story of one of our neighbors who was robbed by mortgage brokers behaving like criminals. Please take a moment to read about Sherrita Richardson here >>

Sherrita, a Kansas City bus driver with four children, found out that her home in the 3400 block of East 60th Street is worth half or less than half of what she paid for it because of an inflated appraisal.

Every 13 seconds, another American family loses their home to foreclosure. As of this morning, there were 5,228 homes in foreclosure in Jackson County, and another 523 in Cass County. Foreclosures uproot families and destroy neighborhoods. There are certainly plenty of people who knowingly got in over their heads, but foreclosures depress all our property values. You can be current on your loan and be doing all the right things, but each foreclosed home in the U.S. reduces nearby property values by as much as 9 percent.

The Helping Families Save Their Homes Act seeks to help the estimated 7- 9 million households facing possible foreclosure by including key incentives that encourage lenders to renegotiate affordable mortgages for homeowners who are underwater, at risk of foreclosure, and those nearing bankruptcy.

Specifically, the bill fixes the Hope for Homeowners program, implemented October 1, 2008, which was designed to get more families into affordable mortgages by reducing current fees that have discouraged lenders from voluntarily participating and offering new incentives for lenders to negotiate loans.

To further encourage participation in this program, the bill protects lenders from lawsuits for modifying loans. This will make reasonable loan modifications available to many more homeowners at risk of foreclosure.

To help families who have exhausted options for relief, the bill also allows bankruptcy judges to modify the terms of a loan for existing primary residence mortgages. This is what is known as the “cram-down” provision.

Currently, the mortgage for a primary residence cannot be modified in bankruptcy—unlike every other secured debt – including debts secured by second homes, investment properties, luxury yachts, and private jets. It gives families who own one home the same rights to keep their home as someone who owns two or three houses.

Stabilizing the housing market is central to restoring the American economy. We all stand to lose if we do not stop the steep decline in home prices.

An estimated 14 million homeowners in America owe more than their home is worth and many cannot refinance into an affordable mortgage.

Some homebuyers were able to make their mortgage payments until they lost their job or their income dropped. Others were victims of predatory lending by banks and are now stuck with unaffordable subprime mortgages, in danger of losing their home, through no fault of their own.

Either way, these homeowners now face foreclosure—a devastating event for a family and one that has negative implications for neighbors through depressed housing values, vacant homes, and a loss of tax revenue for local schools. Anything we can do to stop this cycle we have to pursue, or we will not find the bottom of this economy and begin our recovery.