DeLauro Welcomes Key Step in Effort to Stabilize the Housing Market

Helping Families Save Their Homes Act aimed at stemming foreclosures

Washington, DC – Congresswoman Rosa L. DeLauro (Conn. -3) joined with colleagues to pass the Helping Families Save Their Homes Act (H.R. 1106) to begin to put part of President Barack Obama's comprehensive Homeowner Affordability and Stability Plan into law. In this step to help the millions of households facing possible foreclosure, the bill includes key incentives to encourage lenders to negotiate affordable mortgages for homeowners who are underwater, at risk of foreclosure, and those nearing bankruptcy.

Last week, the President announced his housing plan to help up to seven to nine million families restructure or refinance their mortgages to avoid foreclosure – as well as neighbors whose own house values will drop as a result of a nearby foreclosure.

"Central to restoring our economy is stabilizing the housing market. Some homeowners had been 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. This legislation takes aim at that – it is about slowing the downward spiral by averting foreclosures and shoring up housing prices," said DeLauro.

It is estimated that 14 million homeowners owe more than their home is worth and many cannot refinance into an affordable mortgage. In Connecticut, 39% of CT households pay more than 30% of their income on housing and according to the Center for Responsible Lending, without aggressive action there will be an estimated 17,700 foreclosures in Connecticut in 2009. Each foreclosed home reduces nearby property values by as much as 9 percent. Yet, court-supervised home loan modifications could save a projected 6,600 homes statewide.

Key components of the Helping Families Save Their Homes Act include:

To get more families into affordable mortgages, the bill strengthens the Hope for Homeowners program designed to spur the refinancing of mortgages, by

o reducing current fees that have discouraged lenders from voluntarily participating

o offering new incentives for lenders to negotiate loans.

To prevent foreclosures, the bill protects lenders from lawsuits for modifying loans so that reasonable loan modifications can be available to many homeowners at risk of foreclosure.

To push lenders into helping families who have run out of options, the bill allows bankruptcy judges to modify the terms of loan for existing mortgages, as investors in vacation homes, real estate speculators, corporations, and family farmers are currently able to do.

o This common-sense, practical approach will not cost taxpayers a dime, and could reduce foreclosures by 20 percent.

o "Adding the hammer of the bankruptcy court would create an incentive for more lenders to do that [restructure loans] more urgently – and would provide a reasonable last chance for qualified homeowners when lenders don't act."[USA Today editorial, 3/4/09]

o Bankruptcy is strict with a trustee supervising the family's finances for up to 5 years and is limited to families who prove to a judge that they will be able to repay their debts – it is not an easy way out of debt.

o Recently developed improvements to the bill ensure that we avoid bankruptcy whenever possible, by first and foremost giving homeowners access to a systematic loan modification process.

o Families must show good faith, have taken steps to get a loan modification outside of bankruptcy, and share the increase in property value with the lender for five years, under the bill.