Foreclosure Legislation Update

On Wednesday, a House committee approved $15 billion in loans and grants for local governments to buy foreclosed homes.

The House Financial Services Committee voted 38-26 to approve the bill that is part of a larger package being pushed by House Democrats. Also, on Wednesday the committee passed legislation that would provide lenders with legal protection if they work with homeowners facing foreclosure.

House Republicans opposed the bill and argued that using federal funds to buy foreclosed homes could encourage foreclosure in the long run.

Representative Spencer Bachus (Republican, Alabama) said, “I don’t think we ought to be incentivizing foreclosure.”

Other members argue that certain provisions in the bill (such as making it mandatory for homes to be 60 days into the foreclosure process before they can be purchased) would prevent abuse. Supporters also claim that Congress must do more to help local governments deal with loss of taxes and maintenance of foreclosed homes.

Committee Chairman Barney Frank (Democrat, Massachusetts) said, “Cities are being badly hurt and this is the only vehicle proposed that goes to the aid of the cities and counties.”

The $15 billion will be divided up into $7.5 billion in loans and an equal share in grants. It will be distributed to the states based on foreclosure rate, home prices, and other factors.

Non-profit organizations and Government institutions would be eligible for the funding also. They could use the funds towards the purchase, rehabilitation, or resale of the respective properties.

$3.75 billion of the grant money will be dedicated to providing housing for low-income residents.

Republicans counter that the legislations is too costly and will add to the growing federal deficit.

Mr. Bachus said, “Putting aside the issue of how a large new federal program with a price tag of approximately $15 billion would be paid for, the bill’s ultimate beneficiaries are likely to the lenders, investors and speculators who own the vacant or foreclosed properties.”

However, the bill does allow the government to be repaid on zero-interest, non-recourse loans. Loans for homeownership would be repaid in 2 years while loans dedicated to providing rentals would be repaid in 5 years. Also, the government is entitled to 20% of any appreciation of the property.
The committee rejected a proposal by Republicans to make all of the $15 billions loans, and a measure requiring all states to match all funds received by the government.

Congress and the Foreclosure Crisis

Currently, 20,000 people are losing their homes every week due to foreclosure. At that rate, 100,000 more homeowners will lose their homes before Congress passes a bill to stem the foreclosure flood. Sadly, the proposals currently making the rounds in both chambers will do little to stop the foreclosure crisis.

In order for a worthy relief package to be drawn up, most of the provisions in the bill passed last week in the Senate will have to be scrapped completely.

The bill would cost $21 billion over the next 10 years. $15 billion of that would be going to tax cuts that would have no significant impact on the average homeowner facing foreclosure. One set of tax cuts would let businesses take temporarily larger write-offs for losses. Another set would subsidize renewable energy. A $7,000 tax credit for buyers of foreclosed properties could backfire by allowing banks to charge more for repossessed property that would encourage more foreclosures. Another measure allows non-itemizers deduct property taxes, which is a shady tax policy and does not help the more needy homeowners facing foreclosure.

Also, the House Ways and Means Committee produced an item in the bill that provides tax breaks for first time homebuyers. Buyers should not be encouraged to jump in to properties when further declines in housing price are imminent. The resources available should be focused on preventing foreclosure.

The bill does, however, have some helpful items. Among them is money for local governments to buy foreclosed properties, money for foreclosure prevention counseling, and money for issuing tax-exempt bonds to help refinance sub-prime mortgages. While these are all helpful propositions, more must be done.

Democrats are pushing for a bill that would provide for the FHA to guarantee the restructuring of mortgages for at-risk borrowers. One major advantage of the plan is that due to the nature of the foreclosure crisis, the troublesome loans could be modified in great quantities.

But that plan does have some problems as well. For instance, the average American taxpayers would be responsible if the FHA borrowers defaulted. Congress cannot ask the taxpayers to carry the burden when Congress has not done all that they can to stop the crisis in other ways. One solution may be to give bankruptcy courts the power to modify mortgages.

The Senate had that provision in its most recent bill but eventually dropped it. Bankruptcy legislation has not been able to get out of the House either. Democratic leaders see it as their duty to bridge the gap and bring this type of legislation to the forefront. Both the Senate and the House must make a stand to the mortgage industry that may try to block any help for the crisis that they started.

The plan for the FHA rescue program would rely on lenders to reduce the loan amounts to an acceptable level for FHA to take over. Sadly lenders are not willing to do that. If lawmakers would increase the power of third party loss mitigation services to modify loans, it would make lenders more likely to reduce loan amounts on their own.

Congress has some of the right plans in place, but they need to stand up to the mortgage industry that helped create the current foreclosure crisis.

For more information, please visit:

Stopforeclosurecenter.com
Foreclosure-solutions.biz
Lewisstates.comForeclosure-help.biz

Senate Bill

On April 10, 2008, the U.S. Senate approved a measure that would help both homeowners and businesses during the current foreclosure crisis.

Some supporters of the package, which passed by an impressive 84-12 vote, say that it doesn’t do enough to help homeowners who have mortgage payments that they can’t afford. The measure faces an uphill battle in the House of Representatives.

Senate Majority Leader Harry Reid says, “This is just the beginning of the process. This bill will go to the House. With the house and the White House we can come up with a piece of legislation fairly quickly.”

Currently, the package offers enormous tax breaks for homebuilders, a $7,000 tax credit for those buying foreclosed properties, and $4 billion in grants for communities to buy and fix up abandoned properties.

The White House has not threatened to veto the plan although it has openly opposed the measure. Experts say that parts of the legislation may add to the housing crisis by depressing some home values.
Financial Services Committee Chairman Representative Barney Frank has drafted a House Bill that has the FHA stepping in to back $300 in refinanced loans for over 1 million homeowners facing foreclosure.

South Florida Foreclosures

South Florida foreclosure experts are busier now than they have been in years.

20 years ago there were about 50 foreclosures a week in Broward County.

Currently Broward County has about 1,200 home foreclosures per week. Foreclosures have gone through the roof lately, and there are darker days to come.

As little as two years ago, Broward County, home to 1.8 million people, and Miami-Dade County were choice locales for Real Estate investors looking to make money on high priced condominiums.

But, when rising adjustable rate loan payments started going up, and when the housing bubble burst, things started to get worse.

South Florida has been severely affected by the foreclosure crisis. Housing prices have been plummeting and over 11,000 people filed bankruptcy in 2007.

Experts say that many homeowners will turn to bankruptcy as the only option to stopping foreclosure.

It’s only going to get worse with experts predicting that in 2008 Broward County alone will have 2,000 foreclosures per week.

The recent rise of foreclosures has caused Broward and Miami-Dade courthouses to add a third day of foreclosure auctions per week to its schedule.

Since the state bankruptcy laws changed, the 2007 total pales in comparison to the record 36,000 bankruptcies in 2005. However, some speculate that a sluggish economy could shatter the 2005 record.

However, one man’s trash is another man’s treasure.

Real estate experts have been holding real estate investment classes with as many as 20 students per session.

In South Florida and other foreclosure prone areas, foreclosure bus tours have carried investors to dozens of properties per weekend.

As a result of the foreclosure crisis, the bankruptcy lawyers in South Florida have been busier than they have been in decades.

Sadly, they are just going to get busier, since most people facing foreclosure see bankruptcy as their only option.

Bankruptcy firms are processing about 3 new bankruptcy applications per day.

“Property Flipping” has left many investors holding properties that they no longer can afford, and they see bankruptcy as the only way out of foreclosure.

However, many experts say that the worst of the foreclosure crisis has yet to be seen.

Estimates say that the real estate crisis will cause a halt on building production therefore causing many construction workers to be out of work.

The entire food chain of the real estate business is being affected except for the bankruptcy attorneys.

Homeowners facing foreclosure should know that they have more options available.

For more information, review the following websites:

Stopforeclosurecenter.com
Foreclosure-solutions.biz
Foreclosure-help.biz
Lewisstates.com