Today President Bush signed into law a housing bill passed by Congress aimed at stabilizing the shaky housing market.
A key part of the housing bill will permit struggling homeowners to refinance their mortgages through the Federal Housing Administration—if their lenders and loan servicers agree. The Congressional Budget Office says this program could possibly help 400,000 homeowners, but because the program is voluntary for the loan servicers and lenders, the number of people that would actually avoid foreclosure is largely unknown. The new FHA program should be carefully monitored to see how many homeowners are actually served. Unfortunately, Wall Street analysts expect up to 6.5 million foreclosures over the next few years.
"By providing a chance to prevent more foreclosures, the housing bill provides an additional tool to help us move toward a more stable housing market and a recovering economy," said CRL President Michael Calhoun. "But the subprime crisis is a result of years of reckless lending, and it will take more time and effort to address it effectively."
Underscoring that it will take more than just voluntary efforts on the part of lenders and servicers, data released today from Hope Now showed that foreclosures sales hit an all-time high, and that there were 20,000 more foreclosures than modifications last month.
In addition to the helpful components of the housing bill, The Center for Responsible Lending supports additional common-sense solutions, such as:
- requiring better reporting from mortgage servicers about loan modifications;
- allowing bankruptcy courts to supervise the modification of mortgages on the primary residences of financially distressed families;
- providing temporary deferment of foreclosures until housing markets stabilize; and
- establishing programs like the FDIC's home ownership preservation loan proposal, which would facilitate additional modifications.
For more information: Kathleen Day at (202) 349-1871 or kathleen.day@responsiblelending.org; Sharon Reuss at (919) 313-8527 or sharon.reuss@responsiblelending.org; or Ginna Green at (510) 379-5513 or ginna.green@responsiblelending.org.