Hodes Says His Bill Would Give Homeowners Facing Foreclosure More Options
FORECLOSURE
New Hampshire Union Leader
Jenny Paul
Boston University Washington News Service
Dec. 3, 2008
WASHINGTON—Rep. Paul Hodes (D-N.H.) announced Wednesday that he has proposed a bill to give the government several tools to try to reduce home foreclosures across the country.
The legislation, introduced during the waning moments of this session of Congress, would require lenders to restructure the terms of troubled mortgages and allow bankruptcy judges to modify mortgages on primary residences – changes that Hodes said would let the government deal with the foreclosure crisis more aggressively.
“The rate of foreclosures is rising, not falling,” said Hodes, who promised to reintroduce the bill in January if Congress does not consider it during a December lame-duck session. “More people are losing their homes. The collateral fallout damage to neighborhoods and families is terrible, and I don’t think that mortgage foreclosure has been adequately addressed.”
Hodes said his proposal would provide a “menu of options” to homeowners facing foreclosures. Giving bankruptcy judges the ability to modify the terms of mortgages on primary residences is another option for homeowners who are “so far under water that they need to file bankruptcy,” he said.
But banking industry leaders have staunchly opposed the change, saying it would heighten the risks associated with primary-residence mortgages and result in higher interest rates for mortgages.
“I’ve seen speculation from industry experts that [interest rates] could go up by at least 1 percent, so if the current rate were 6 [percent], you’d be looking at 7 [percent],” said Ralph Coppola, president of the Mortgage Bankers and Brokers Association of New Hampshire. That, he said, is “because the risk factor on primary mortgages now is completely going to change if they can be modified after they’ve closed and been sold.”
The legislation would force the hand of lenders who have been hesitant to renegotiate the terms of loans for homeowners facing foreclosures. It would require several federal agencies, including the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corporation, to restructure all home loans that they own or in which they have a controlling interest.
Language in the $700 billion bailout package that Congress passed in October simply encouraged those agencies to renegotiate mortgages. Hodes voted against the bailout, saying it focused “too much on Wall Street” and did not adequately address the mortgage crisis.
Hodes’ proposal also would mandate lender participation in the government’s HOPE for Homeowners program, which helps qualified borrowers who are facing foreclosure refinance into fixed-rate, government-insured mortgages. The voluntary program, which took effect Oct. 1, so far has failed to garner many applications from consumers or support from mortgage lenders, who must take a loss when they write down the principal of a loan as part of the program.
“The HOPE for Homeowners program is pretty new, and we haven’t seen tremendous numbers from it,” Hodes said. “So far it hasn’t worked on a voluntary basis. I think that given what we’re facing, required participation is the way to go until we’re on the other side of the current crisis.”
His new bill also would place some additional limits on dividends and executive compensation paid out by banks who gave the government preferred stock in exchange for a share of the $250 billion in bailout funds allocated for government investment in banks.
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