Frank, Waters Call For Foreclosure Moratorium
July 28th, 2008
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The chairman of the House Financial Services, Rep. Barney Frank (D-MA) and Housing and Community Opportunity Subcommittee Chairwoman Maxine Waters (D-CA) want the mortgage industry to halt foreclosures until October 1st. That’s when the provisions of the FHA bill go into effect.
Look for fireworks if HUD cannot get the foreclosure relief measure up and running by October 1st. Also, look for congressional hearings to pressure HUD and private-sector lenders to get revised programs in place before October 1st.
Under the bill’s provisions for an expanded FHA mortgage program, many borrowers now facing foreclosure might be able to refinance — thus saving their homes from foreclosure and reducing potential lender losses.
“I would hope,” said Frank, speaking to lenders and servicers, “that no one would be foreclosed upon between now and October 1st who would have qualified for this program had the effective date been immediate. And that is within your power to do. You can show some forbearance. October 1st is coming, begin the planning, begin the talking with people, but I think it would be a shame, an embarrassment to all of us if people were to lose their homes and the neighborhood deterioration were to be advanced and the economy would suffer because to satisfy CBO and other rules, we delayed this a couple of months. I earnestly hope that we can have that kind of cooperation.”
Waters added that “as one who has focused on mortgage servicing from the outset of this crisis, I strongly support the Chairman’s call for forbearance until October 1st. It would be shameful for a single homeowner in California, or anywhere else hit hard by the foreclosure crisis, to lose their home if they could have been helped by this program but for this deadline.”
In order to qualify for FHA refinancing under this program, borrowers would have to have more than 31% of their monthly income dedicated toward their mortgage payment as of March 1, 2008, and live in their only home. Borrowers would have to meet the specific qualifications of the FHA program, and would have to agree to share future home appreciation with the government. Lenders would also have to agree to significant reductions in the amount owed to them. The Congressional Budget Office estimates that at least 400,000 families will avoid foreclosure at no cost to the taxpayer.
Frank also called for restructuring the mortgage servicing industry if servicers fail to cooperate in aggressively forbearing and preventing foreclosures, or if there are institutional roadblocks that prevent mortgage workouts or other restructuring that is needed in order to help borrowers, and thereby help the housing market and the economy overall.
Given Frank’s position in the House, this is not a view that lenders or servicers can ignore.
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October 8th, 2008 at 7:20 am
BACK IN THE 70′S WE HAD A HOME FINANCED THRU FHA AND HAD FINANCIAL DIFFICULTY. WE WERE ABLE TO GET A 6 MONTH MORATORIUM ON OUR PAYMENTS TO KEEP FROM LOSING OUR HOUSE. OUR DAUGHTER AND HER HUSBAND HAVE A MOBILE HOME FINANCED THRU FHA. HE LOST HIS JOB. IS THERE STILL SUCH A PROGRAM?
JONI