Senate Drawing Closer to Passing Foreclosure Prevention Act
The U.S. Senate finally reached a tentative agreement early Thursday morning on the terms of the new Foreclosure Prevention Act, which seeks to aid homeowners by helping them fight off loan defaults in an effort to stem to rising tide of foreclosure that is sweeping the nation.
When first introduced, the Bill was extremely controversial, and brought heated debate from senators on both the Republican and Democratic sides. But after the Senate reconvened after a two week recess earlier this week, both sides pledged to put side their partisan bickering to reach an agreement quickly, as all could agree that the situation was dire and needed to be dealt with swiftly.
The biggest point of contention in the bill was a provision that would have allowed bankruptcy judges to waive portions of loans owed by homeowners by changing the terms of mortgages in certain cases, a point the Republican side simply wouldn’t allow. Eventually, the democrats allowed the provision to be excised from the bill, and things began to move along more speedily.
One of the biggest components of the bill was geared towards modernization of the Federal Housing Authority, and a number of measures were passed that were designed to increase the reach and effectiveness of the FHA in getting to families who need their help. However, a great deal of the bill was also dedicated to dealing with the problems foreclosures have already created in communities. The Bill allocates over $4 billion in funding for communities that have been devastated by foreclosure. This money will be used to buy up the abandoned homes and redevelop neighborhoods who have suffered due to the bottoming out of home values as a result of foreclosure.
The bill will also allocate funds to help homeowners in distress who are in danger of foreclosure by providing over $100 million in the form of pre foreclosure counseling. Another provision ensures that upon buying a loan, they are entitled to full disclosure of the amount of maximum monthly payments under their loan before closing the deal. This is aimed at helping homeowners avoid the soaring monthly payments associated with adjustable rate mortgages, which have wreaked havoc on the market by causing so many foreclosures.
One of the most interesting provisions of the loan for possible foreclosure investors is an initiative to offer tax breaks to anyone who buys a foreclosure property. The purchase of surplus foreclosures is seen as key by many experts and economists to the housing market’s ability to rebound and heal itself. Foreclosures and abandoned properties drag down property values and encourage banks to employ tighter lending policies, thus making new homeownership unlikely. The new measure will provide a $7,000 tax credit to anyone who buys a foreclosure property, as this will hopefully encourage the practice and help raise property values.
The Senate will debate the proposed Foreclosure Prevention Act for the rest of the week, but at this point the details seem to be mostly nailed down, and there should be a vote early next week. Once the bill is passed, it will be interesting to chart its effects on the foreclosure market.
