Congress considers changes to mortgage aid program
by Florida Association of Realtors
WASHINGTON – Feb. 5, 2009 – With fewer than 500 applications and only two-dozen homeowners
helped so far, House lawmakers moved Wednesday to revamp a new program that was intended to
help hundreds of thousands of borrowers avoid losing their homes.
The changes approved by the House Financial Services Committee come as Congress and President
Barack Obama refine the most dramatic steps yet to boost the ailing U.S. housing market. Treasury
Secretary Timothy Geithner is expected to announce a new approach for aiding borrowers and rescuing
the flailing financial industry next week.
The Obama administration wants to spend up to $100 billion in financial bailout money to help
borrowers stay in their homes.
Meanwhile, the Senate voted Wednesday night to give a tax break to homebuyers in hopes of revitalizing
the U.S. housing market. The proposal, pushed by battered homebuilders, would allow a tax credit of 10
percent of the value of new or existing residences, up to a $15,000 limit.
Democrats readily agreed to the proposal, although it may be changed or even deleted as the massive
economic stimulus measure makes its way through Congress over the next 10 days or so.
The government’s efforts to stem the foreclosure crisis thus far have relied on voluntary cooperation of
the lending industry. The plans have not stopped a dramatic surge in foreclosures that is likely to
worsen as workers lose their jobs amid a deepening recession.
“We will have to do more – substantially more – to fix this crisis,” Geithner said Wednesday.
During the presidential campaign, Obama said banks that receive federal bailout money should be
required to halt foreclosures for 90 days, but that hasn’t happened yet.
“I voted for Obama just for that reason,” said Leroy Hernandez, 52, who lives outside Richmond, Va., and
fears foreclosure is imminent on his home loan. “Maybe I’m just gullible.”
The company that collects payments on Hernandez’s loan, Litton Loan Servicing, is owned by Goldman
Sachs Group Inc., which has received $10 billion in federal bailout money.
Litton spokeswoman Donna Marie Jendritza said Hernandez was denied a modification because he did
not provide proof of his income, but added that he is welcome to apply again.
“If proof of income is not provided, we cannot go forward,” she said.
Nick Shapiro, a White House spokesman, said in an e-mail that Obama “is working very hard on a
significant foreclosure prevention program that will be substantially more sweeping than the ideas put
forward in the past.”
Congress last year created the Hope for Homeowners program, which was supposed to allow 400,000
troubled homeowners swap risky loans for traditional 30-year fixed-rate loans with lower rates. But only
25 loans have been approved since the program started in October out of 451 applications, despite
more than 66,000 calls to the Federal Housing Administration about it from consumers and lenders.
Under the bill approved by the House committee, several restrictions on the program would be lifted in
hopes of allowing more people to qualify.
Meg Burns, the federal housing official in charge of the program, testified this week that tight restrictions
on who can qualify and high fees have led to the disappointing results. The bill approved Wednesday
would reduce those fees and lift some of those restrictions.
Republicans were skeptical. “While Americans all over this country are struggling with their own
mortgages, should they be forced to pay their neighbors?” said Rep. Jeb Hensarling, R-Texas. “There
are basic questions of fairness.”
However, some consumer advocates argue the changes aren’t enough.
“It’s not the magnitude of help that’s needed,” said John Taylor, president of the National Community
Reinvestment Coalition, a consumer group in Washington that’s pressing the administration to buy up
distressed loans in bulk and modify them so borrowers stay in their homes.
While plans to assist homeowners likely will anger those who oppose subsidizing borrowers who may
have acted irresponsibly, the Obama administration appears to agree that such action can help stem
the financial crisis.
“We’re not going to be able to eliminate all foreclosures, but can certainly keep that number from getting
out of control,” said Robert Litan, a senior fellow at the Brookings Institution, a liberal-leaning think tank.
By doing so, “you should be able to reduce some of the losses on the securities which are driving the
banks under.”
The committee also approved a bill to protect companies that collect mortgage payments from lawsuits
after they modify loans, and legislation that makes permanent the Federal Deposit Insurance Corp.’s
$250,000 limit on insured deposits. That limit was raised from $100,000 last year.
Copyright 2009 The Associated Press, Alan Zibel (AP Real Estate Writer). All rights reserved. This
material may not be published, broadcast, rewritten or redistributed. Associated Press Writer David
Espo contributed to this report.
by Florida Association of Realtors
WASHINGTON – Feb. 5, 2009 – With fewer than 500 applications and only two-dozen homeowners
helped so far, House lawmakers moved Wednesday to revamp a new program that was intended to
help hundreds of thousands of borrowers avoid losing their homes.
The changes approved by the House Financial Services Committee come as Congress and President
Barack Obama refine the most dramatic steps yet to boost the ailing U.S. housing market. Treasury
Secretary Timothy Geithner is expected to announce a new approach for aiding borrowers and rescuing
the flailing financial industry next week.
The Obama administration wants to spend up to $100 billion in financial bailout money to help
borrowers stay in their homes.
Meanwhile, the Senate voted Wednesday night to give a tax break to homebuyers in hopes of revitalizing
the U.S. housing market. The proposal, pushed by battered homebuilders, would allow a tax credit of 10
percent of the value of new or existing residences, up to a $15,000 limit.
Democrats readily agreed to the proposal, although it may be changed or even deleted as the massive
economic stimulus measure makes its way through Congress over the next 10 days or so.
The government’s efforts to stem the foreclosure crisis thus far have relied on voluntary cooperation of
the lending industry. The plans have not stopped a dramatic surge in foreclosures that is likely to
worsen as workers lose their jobs amid a deepening recession.
“We will have to do more – substantially more – to fix this crisis,” Geithner said Wednesday.
During the presidential campaign, Obama said banks that receive federal bailout money should be
required to halt foreclosures for 90 days, but that hasn’t happened yet.
“I voted for Obama just for that reason,” said Leroy Hernandez, 52, who lives outside Richmond, Va., and
fears foreclosure is imminent on his home loan. “Maybe I’m just gullible.”
The company that collects payments on Hernandez’s loan, Litton Loan Servicing, is owned by Goldman
Sachs Group Inc., which has received $10 billion in federal bailout money.
Litton spokeswoman Donna Marie Jendritza said Hernandez was denied a modification because he did
not provide proof of his income, but added that he is welcome to apply again.
“If proof of income is not provided, we cannot go forward,” she said.
Nick Shapiro, a White House spokesman, said in an e-mail that Obama “is working very hard on a
significant foreclosure prevention program that will be substantially more sweeping than the ideas put
forward in the past.”
Congress last year created the Hope for Homeowners program, which was supposed to allow 400,000
troubled homeowners swap risky loans for traditional 30-year fixed-rate loans with lower rates. But only
25 loans have been approved since the program started in October out of 451 applications, despite
more than 66,000 calls to the Federal Housing Administration about it from consumers and lenders.
Under the bill approved by the House committee, several restrictions on the program would be lifted in
hopes of allowing more people to qualify.
Meg Burns, the federal housing official in charge of the program, testified this week that tight restrictions
on who can qualify and high fees have led to the disappointing results. The bill approved Wednesday
would reduce those fees and lift some of those restrictions.
Republicans were skeptical. “While Americans all over this country are struggling with their own
mortgages, should they be forced to pay their neighbors?” said Rep. Jeb Hensarling, R-Texas. “There
are basic questions of fairness.”
However, some consumer advocates argue the changes aren’t enough.
“It’s not the magnitude of help that’s needed,” said John Taylor, president of the National Community
Reinvestment Coalition, a consumer group in Washington that’s pressing the administration to buy up
distressed loans in bulk and modify them so borrowers stay in their homes.
While plans to assist homeowners likely will anger those who oppose subsidizing borrowers who may
have acted irresponsibly, the Obama administration appears to agree that such action can help stem
the financial crisis.
“We’re not going to be able to eliminate all foreclosures, but can certainly keep that number from getting
out of control,” said Robert Litan, a senior fellow at the Brookings Institution, a liberal-leaning think tank.
By doing so, “you should be able to reduce some of the losses on the securities which are driving the
banks under.”
The committee also approved a bill to protect companies that collect mortgage payments from lawsuits
after they modify loans, and legislation that makes permanent the Federal Deposit Insurance Corp.’s
$250,000 limit on insured deposits. That limit was raised from $100,000 last year.
Copyright 2009 The Associated Press, Alan Zibel (AP Real Estate Writer). All rights reserved. This
material may not be published, broadcast, rewritten or redistributed. Associated Press Writer David
Espo contributed to this report.
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