Four senators are putting their muscle behind a new housing bill intended to prohibit lenders operating in the U.S. from foreclosing on home owners without first having discussed reasonable modification options with the borrowers.
The bill, called the Preserving Homes and Communities Act is being sponsored by Rhode Island Senator Jack Reed, Illinois Senator Dick Durbin, Jeff Merkley of Oregon and Sheldon Whitehouse of Rhode Island.
Under this bill, lenders will be forced to the negotiating table under the threat of stiff fines and other legal penalties.
All lenders will be required to perform what the bill terms as a "net present value" test for all seriously delinquent borrowers. The test would be a financial analysis weighing the benefits of a modification of loan terms against the benefits of foreclosure.
For borrowers who do not fit into this program, the bill would create a multi-billion national fund for states to make loans or grants in order to prevent foreclosures.
The senators' rationale behind the creation of this bill is that they are frustrated with the slow pace of current loan modification programs and feel that they are not keeping up with the record numbers of foreclosures this year.
"Voluntary efforts to keep families in their homes have failed," said Durbin. "This bill will force lenders to modify qualified mortgages rather than letting them move quickly to foreclosure, which destroys households and neighborhoods."
The act will also set up a mortgage payment assistance program to provide money to state housing agencies to assist people who have lost income and face the prospect of foreclosure.
The most significant aspect of this bill would be to create "mandatory mediation" requirements forcing lenders to allow some mediation efforts between them and their borrowers before being able to file foreclosures against home owners.
This proposal will, no doubt, be met with opposition by banking and mortgage lending groups. It is, however, currently favored to be supported in the House.
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Wow I hadn't heard of this before. Thank you for posting it. It will definitely be interesting to follow and see what happens to it and how it changes and morphs before passing,,, if it does. I currently have 4 families that are considering short sales who also have loan modifications "in process" but haven't heard anything from their banks about the loan mod in months. They are going under and are desperate. It would be great it something happened so the banks answer in a timely manner but also help the ones that need help, like it was set up to do. My 4 families are all still paying their loans but won't be for long. The loan modification would have made a huge difference to them and still could if they get it through. Keep us posted, thank you