600,000 Foreclosures are Preventable
Court-supervised loan modifications would preserve home values—without using public funds—while providing fair terms to lenders.
Over the next several years, two million American families will lose their homes—roughly 20,000 each week. Because of market declines, these struggling homeowners can neither refinance nor sell their homes. Unless their mortgages are modified to align the loan amount with the value of the home, the foreclosure crisis will continue to get worse.
The damage of foreclosures extends beyond the families who lose their home: 40 million of their neighbors could also lose billions of dollars in hard-earned wealth as home values decline.
There is an effective solution. We need to lift legal barriers that now prevent struggling homeowners from seeking loan modifications through the courts. Bills pending in the House and Senate would permit the courts to dramatically expand our capacity to prevent foreclosures.
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Court-supervised modifications could prevent foreclosures and loss of community wealth.
By lifting the ban on court-supervised loan modifications for qualified homeowners, Congress can help communities retain an estimated $89 million in tax revenues.
View state-by-state analyses of the impact of Senate bill S. 2636. |
These bills are narrow:
- They apply only where the home will otherwise be lost in foreclosure, and guarantee lenders at least as much as they could recover at a foreclosure sale.
- Relief is available for existing loans only (loans made in the future are not covered).
- Relief is available only for families holding the kinds of mortgages that the federal regulators deem potentially dangerous – i.e., subprime and "non-traditional" loans.
- Lenders still have the right to offer the homeowner a loan modification outside of bankruptcy that would make the loan sustainable for the long term, and where they do so, the homeowner will not qualify for bankruptcy relief.
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Understand why this legislative change is needed
Subprime lenders flooded the market with dangerous loans approved without reasonable precautions, and now they're blaming homeowners. Read this Columbia Journalism Review analysis of why borrower fraud explains only a tiny fraction of the subprime mess.
The solution to housing crisis requires adjusting loans to fair market value.
Loan servicers are not modifying loans voluntarily. 
Industry-led Hope Now initiative falls short.
Loan Modifications do not hurt mortgage market.
Statement of Eric Stein, Senior Vice President to US Senate Judiciary Committee on The Looming Foreclosure Crisis: How To Help Families Save Their Homes December 5, 2007
Written testimony of CRL's Eric Stein before the House Judiciary Committee Subcommittee on Commercial and Administrative Law:
Testimony of Ellen Harnick, Senior Policy Counsel, Center for Responsible Lending before the U.S. Senate Committee on Banking, Housing and Urban Affairs hearing on "Turmoil in U.S. Credit Markets: Examining Proposals to Mitigate Foreclosures and Restore Liquidity to the Mortgage Markets." April 10, 2008.
Learn more about HR 3609, "Emergency Home Ownership and Mortgage Equity Protection Act".
Bipartisan HR 3609 would save 600,000 homes.
Summary of HR 3609 Bipartisan Compromise Bill.
Myth v. reality: the truth about HR 3609.
Letters of Support for HR 3609:
Learn more about the S2636 "Foreclosure Prevention Act of 2008" (S 2136 is now Section IV of S2636).
Servicers often can’t modify loans even if they want to: Section IV of S. 2639 is the only solution to this problem.
Court-Supervised ModificationsWould Have No Negative Impact On the Cost Of Credit: Rebuttal to MBA
Compromise Senate Bill Would Prevent 600,000 foreclosures.
Center for Responsible Lending separates myth from reality about the bankruptcy provisions of S 2636.
Letters of Support for S 2636 (formerly S 2136)
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Neil E. Harl, Charles F. Curtiss Distinguished Professor in Agriculture and Emeritus Professor of Economics at Iowa State University, urges Congress to pass S 2636.
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- Diverse group of consumer, civil rights, labor, retiree, housing, lending and community organizations join together in support of S2636 (formerly S2136.)
