Controversy Surrounds Foreclosure Prevention Act
Amidst the unveiling of the new Foreclosure Prevention Act, there has been much controversy. The bill was stalled for along time over arguments between Republicans and Democrats in the Senate over certain provisions, and now that argument has become a public one.
The Senate announced a tentative agreement on the Foreclosure Prevention Act on Thursday, citing that the two sides came together in the interest of passing a bill quickly in order to start doing something about the national foreclosure crisis. Talks were stalled before the Senate took a two week recess which ended on Monday, but they came back reinvigorated and ready to move towards an agreement.
Now that they have announced the terms of the tentative bill, it has drawn the ire of some groups who say it does not do enough for homeowners facing foreclosure. One of the major hotbed issues of debate concerning the bill was the inclusion of a provision that would have given bankruptcy judges the ability to redraw the terms of certain mortgages in special cases so that homeowners would be more able to keep up with payments. Since adjustable rate loans with fluctuating, high monthly payments have been blamed for much of the foreclosure crisis, the idea of this provision was to help homeowners get into better mortgage plans.
However, Senate republicans and the White House stressed that no such clause could exist, as they believed it would unfairly “bail out” irresponsible investors who got into risky loans hoping for a quick sale and profit. The democratic side argues that this pales in comparison to the thousands of families in ever state stuck with loans they did not fully understand, and are now paying the price through foreclosure. Eventually, the provision was stricken from the Bill as senate republicans seemed to win out.
But today the Center for Responsible Learning in Minnesota announced that any bill leaving out this clause would be ineffective at actually stemming the foreclosure rate anytime soon. CRL Chairman Kieran Quinn said that “We are left with a bill loaded with special considerations for mortgage companies and builders that does very little for homeowners who were sold predatory loans by mortgage lenders.” He also argued that the only way to actually slow the rate of foreclosure would be to alleviate bankruptcies.
The bill contains other provisions that will work in other ways to solve the housing problems that are plaguing the economy. A major component is the FHA Modernization provision, which seeks to expand the ability of the Federal Housing Authority in reaching citizens who need help finding housing or getting assistance with their mortgages when they face foreclosure. The Senate also worked out an agreement on a tax credit for anyone who buys a foreclosure. With so many foreclosure son the market dragging down property values nationwide, economists believe that buying these properties up is a huge part of helping the market rebound, so the bill seeks to encourage this practice among citizens.
Ultimately, the Foreclosure Prevention Act will be further discussed and voted on early next week, and these arguments may have a bearing on its final outcome as of yet.
