New Housing Bill Will Force Loan Modification

Real Estate Agent with The Buyers' Counsel

loan modification paperFour 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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Joel Javan
EXiT Realty SCV - Santa Clarita, CA

Ryan Servatius,

With regards to your comment below,

"OK, Ill play the devils advocate on this. What does the person who pays their bills on time get out of this?  I am all for keeping people in their homes and nothing is worse than a family being uprouted, but what is the benefit for paying your bills on time in this day and age???"

Ths is when society gets in trouble - it's when people say "What's in it for me?" Instead of saying asking that selfish question, we should always look for opportunities to help others.
Oct 08, 2009 04:28 AM #151

Joel, it's great that you are willing to help others.  Noone is against helping others, and that is why you'll find CONSERVATIVES as a whole donating MORE of THEIR money to charities, churches, etc...


The problem WE have is when we are FORCED to help the irresponsible.  And the society is truly in troulble when the bad choices are exused and those who have made the RIGHT choices are punished by being forced to bail out those with poor choices.


Btw, I can't qualify for a mercedez right now.  Will you help me buy it?

Oct 08, 2009 04:34 AM #152
Jeff R. Geoghan
Coldwell Banker Residential Brokerage - Lancaster, PA
REALTOR, Marketing Manager

Wow, what a discussion you tripped off Claudette!

What I'm seeing as a common denominator, even for those who would favor legislation, is a general distrust of government to take care to do it right. 

Don't lose that distrust.

An all-powerful centralized government was never the intention of our country's founders (even the ones who later went on to lead the "Federalist Party").  To a man they viewed a central government as a necessary evil to deal with internation relations and common defense.  This country was founded as an assembly of sovereign states coming together in the common cause of liberty.  Everyone in the room at the time knew that a powerful central government was an enemy to liberty.  Unfortunately, here we are today with a distracted populace and a more-hungry-than-ever central government.  That's why I can't trust anything that is proposed (especially from members of the central government whose character and actions are subject to reproach) by any of the branches in Washington.

Folks, the ultimate answer to this crisis is going to have to come from communities and neighborhoods, people coming together to help those people like the couple that called you, Claudette

We've got the realize that feeding more power to a power-mad central government isn't a good long term solution.  I just wish the states would step up as the sovereign powers they are.

OK, 'nuff political analysis...


Oct 08, 2009 05:58 AM #153
Jay-Paul Lowry
Riverside, CA

I guess Durbin didnt get the message that HAMP has met modificaiton goals prior to the Nov. 1 deadline. This just proves that it is never going to be enough. From the National Mortgage News:


HAMP Meets Obama Loan Mod Target

Servicers participating in the Obama Administration's Home Affordable Modification Program have placed over 500,000 borrowers in trial modifications, according to government officials, meeting a benchmark goal several weeks before the Nov. 1 deadline. Administration officials and HAMP servicers are meeting in Washington and they are expected to agree on new streamlined documentation requirements for the loan modification process. Preliminary numbers show HAMP servicers have picked up the pace of moving troubled borrowers into 90-day trial modifications. In addition, some of the modifications are being finalized. Wells Fargo Home Mortgage said it has done 63,000 trials and completed modifications in September, up from 33,200 trials in August. "We have remained focused on exceeding our share of the government's goal to reach 500,000 Home Affordable Modifications by Nov. 1," WFHM co-president Mike Heid said. Bank of America said it has close to 95,000 borrowers in trials, up from 59,900 in August.

Oct 08, 2009 06:22 AM #154
Doug Bittner
Bittner Auction Group LLC - Round Hill, VA

Many keep saying, "Let's help others..." WHAT ABOUT THE FUTURE GENERATIONS? How about helping your kids and grandkids, instead of leaving them buried in debt?

I'm all for helping out someone down on their luck, but the truth is, we all are losing something right now. Everyone's 401Ks are tanking, educational funds are drying up, early retirement plans or ANY retirement plans have dissolved into thin air as house values have plunged. Everyday, people are praying, "Please just let me stay healthy or keep my job." So, should we try to bail out all those people who are at the bottom? What will happen to my children's futures if the government does that? Unless you are willing to reach into your pocket and hand them actual dollar bills to get their heads above water, then it's most likely a futile cause. Instead, the government (who has to get the money from SOMEWHERE, right?) raises taxes, and instead of the dollars going to directly to the people who need it, they go to the government program, where that black-hole program eats it up and spits out a teeny-tiny little "solution" to everyone's problems.

I feel for the story about the elderly couple, one with cancer, one in bartending school...but in helping them, my kids will suffer the consequences. MY KIDS. I really don't care about me. What I think is we all, as a country, have to take the hit now, and take it hard. We have to 'man-up' and bring all this spending under control. The elderly couple should go live with their kids, niece, whomever. They should solicit their church for help. Their house shouldn't be saved with my kids' futures.

Janice B.

Oct 08, 2009 07:06 AM #155
Dave Hymes
RE/MAX Gold - Placerville, CA

Seems to me there is something fundamentally wrong with this. The politician's intentions are good but I can't understand how, in the United States of America, that the government can force a private business to change the terms of a perfectly legal contract to that business' determent. If we start going down this road where does it end? Just throw contract law out the window? I'm thinking that if this were challenged in court that there is no way that the banks would lose.

Oct 08, 2009 07:25 AM #156
Mark Velasco
Sharpstone Realty, Inc - Whittier, CA
Listing Agent-Whittier & Surrounding ciities

The only reason they are doing this is to avoid the next three or four waves of foreclosures coming soon.

Oct 08, 2009 01:39 PM #157
Esko Kiuru
Bethesda, MD


Mortgage lenders have undoubtedly been dragging their feet on loan mods and perhaps this bill will make a difference. There are still plenty of foreclosures on the horizon, so it isn't too late.

Oct 08, 2009 02:44 PM #158
Nicki Pousson

I urge every Realtor to support the new Preserving Homes and Communities Act to force banks and lenders to address loan modifications with homeowners now.  The rate of foreclosure is staggering and will continue to rise.  In Phoenix, our foreclosure rate has increased 85% this month alone.  Homeowners need your help now.  It is appalling what the banks are being allowed to do after the bailout by the tax payers!  Sellers are waiting up to a year and a half (Countrywide)for approval on short sales of their homes (because lenders will not modify their loans)and the market continues to decline.  Homes a left vacant, many for more than a year,interiors destroyed from vandals and landscaping ruined for lack of water.  This alone, drives the market value of area homes down, let alone the neighborhoods.  We are in a crisis and it is time that our elected officials act now on behalf of the American Homeowner!

I understand that their is no cash benefit for the person that pays their bills on time but the real benefit could be that their own home values stop declining.  The other positive is that you can go to sleep at night without worrying how you're going to make it.  Like many homeowners, I purchased my home for the long term but when pricing decreases from $900,000.00 to $400,000 and I owe $695,000.00 when do we say enough?  Will I ever see my value increase to this level again or at least to what I owe.

I've been a in real estate for the past 27 years and I have never seen anything like this.  I'm not one of the Realtors that made a fortune during the boom because I would not recommend my clients pay over appraised price or take a loan that would only hurt them in the long run but a great many others did!

Is it fair that the 2 sales agents in my neighborhood that purchased 12 homes among themselves and their families and have now walked away go unscathed?  Since the new home sales market has come to a halt they are now working as Realtors preying on the home owners they sold new construction to and advised them to do 125% financing and are now talking them into short selling their homes. Or they lied and let the investor purchase a home they knew they were not going to occupy.

Is it fair that my median sales price was $400,000.00 and the average commission was 3% and now my average sales price is $125,000.00 and the average commission is 2%.

There is one thing in life that I have learned and that is, nothing is ever fair!  So life is not fair.  Suck it up and help your neighbor because it's the right thing to do.  Support and encourage your elective officials to support Preserving Homes and Communities Act!



Thank you.

Oct 08, 2009 03:46 PM #159
Allison Stewart
St.Cloud Homes - Saint Cloud, FL
St. Cloud Fl Realtor, Osceola County Real Estate 407-616-9904

At what cost?  Billions of dollars coming from whom? 

America has been down this road already- it was called the Great Depression of 1929.  Exactly, how much control do you want the govenrment to have? Some of it, most of it or all of it?

"We the people"  have no say in this matter.

Oct 08, 2009 10:04 PM #160
Tressa "Teri" Malone
Keller Williams Realty Premier Properties - Westfield, NJ
Westfield NJ Area Properties

KUDOS to #110 121, 156 and 158 --- and all the others who want to help, but want the feds to stay out of it!  And while I don't care for the tone of #46, he's essentially correct.  Our Fed Govt was never intended to do anything except preserve our Constitution and protect us from our enemies.

And, folks, GIVEAWAYS HURT EVERYONE!  They are the lure that enslaves and destroys the will of otherwise good people. 


I'm furious that lenders were "forced" to give loans to people who would not normally qualify

I'm seriouisly pi__ed that lenders tried to increase their profits with such a risky move as packaging mortgages and then selling them as securities

I feel betrayed by Paulson et al for not doing their jobs and then pushing the panic button (I really think he just wanted to help out his friends in the financial industry)

I could kick myself for voting for someone who was asleep at the switch, giving Paulson the opportunity to do this

While I feel for people who got into loans they didn't understand -- I don't think such naivete should be rewarded -- for then what will encourage such people to be more wary in the future?

[I am reminded of the time I ordered a weight loss product that promised astonishing results -- lost no weight -- and discovered that the "money back guarantee" wasn't worth much because company from which I ordered the product changed their address every 30 days or so.  Won't do THAT again]


I hope (and in fact believe) Obama will press his message of personal responsibility while he is encouraging us to share & care.

I  pray regularly for people who "did it the right way" only to lose their jobs and income and now their home thru no fault of their own.  These are the victims

I believe the most important things Americans can do are

1. READ, Folks, READ -- if you don't know how we got here, you're going to be falling for every scheme any lobbyist or poitician comes up with.

2. Think about (at least) doing what intelligent people have always done in the face of a crisis: examine the past so we don't repeat it, batten down the hatches and ride out the storm, and finally embrace the future with more sense and a lot more caution.

3. Reach out and help those you can ... those in your sphere, people you see or hear from.  Remeber the guy with the starfish?  If each of us thinks like that guy, we'll do more (collectively) than any government can do.

4. Keep in mind that our "enemies" won't necessarily plant bombs and carry guns ... some will waive I.O.U.s at our governenment and demand payment in the form of "taking over" our lives.  THAT DISASTER WOULD FAR OUT-WEIGH OUR CURRENT ECONOMIC CRISIS!

One thing seems certain:  I probably won't ever be able to retire!  But then, retirement is a 20th century invention that looks like it may die in the 21st. Anyway, I don't mind working forever since I like what I do -- and I'm hoping if I keep on being being engaged and productive, God will let me stick around. 


Oct 09, 2009 12:39 AM #161
Pete Buckley
Independent Broker/Realtor, North San Diego County CA. - Del Mar, CA

I've noticed that the Govt. NEVER comes up with the idea of drastically reducing taxes or even eliminating tax for a year.

The "answer" seems to be to decide where to spend (read: BLOW) the citizens money on bailing out idiots.

To the poster who thinks Banks loan their "assets held", this would represent 5-10% of all mortgages. Most of the loans I've done were sold before funding and most of those were sold to fannie. So, you might be right in terms of who's money funds the loan but, after a very short time that loan is sold and the funds are returned to the Lender to loan them again!

Oct 09, 2009 04:04 AM #162
Dawn Barry-Griffin

Excellent comments from all sides. Louis (#75 )had some great ideas that could really help.Personally,I'm very happy that my Senator Jeff Merkeley is a co-sponsor of this legislation.

Attempting to modify a loan should help all of us; homeowners who are current or own their homes outright benefit by not having to watch their equity fall due to a rash of foreclosures or short sales which devalue their property. I'd rather see my neighbor stay in their home than see it sit empty, get foreclosed on or worse. Rent backs by the bank should be an option. If a bank already loses during the foreclosure process, then why not attempt to mitigate a % of that loss; that benefits their shareholders, the bank, and the current mortgage holder.

Oct 09, 2009 01:14 PM #163
Paul Francis
Francis Group Real Estate - Las Vegas, NV
Las Vegas Real Estate Agent - Summerlin Homes

Just delaying the inevitable and slowing down the correction... the longer it takes... the longer we get to put up with changing rules every four months to correct the last failures...

I think by now... we could have just paid off everybody's mortgage with all of the wasted money...

Oct 09, 2009 11:32 PM #164
Joe and Molly Murphy
Coldwell Banker - Bradenton, FL
Put our Team to work for your Family

There are some great comments here.  Here's my thoughts.

A 30 year mortgage is a rip off to the consumer.  The banks that negotiate with a home owner that is going to default will benefit to do a principle reduction and, or loan mod vs selling the asset at a depressed REO price.  If there is no intervention then the market will correct further and the truth that the middle class is already gone will surface.  I have already seen homes selling for 25% of their "peak" values.  Where will it go if left unchecked 2.5%, NO WAY, people are greedy, and have short lived memories. 

"home owners" are really just renting from the banks.  This is just like it was with "serfs and their masters"

We already live in a socialized country. Don't you enjoy having police, fire dept, libraries, social security, free education for everyone, medicare/medicad.  Government intervention (sponsored by wall street) was a major factor in creating the bubble, so whats really wrong with them trying to fix it now?

 Since the goverment has already bailed out the banks, insurance, wall street and auto industry, why should they stop now and not help the consumers.  Help homeowners, the banks have been ripping off the consumers for years.  They don't need any help.


Oct 12, 2009 12:26 PM #165
George Wilson
Lincolnton, NC - Lincolnton, NC

A lot of good responses on both sides of the agrument for gov't intervention. IMO the problem with the gov't creating any new bill that requires taxpayer money is usually doomed to fail because 1) Hardly any of them actually reads the bill in it's entirety (that's why they hire assistants); 2) Even when a bill addresses oversight it never gets done correctly until the sh** hits the fan but then the damage is done except for the blame game; 3) Most common sense people know it's a shaky bill when a 1,000 page bill to reported to the floor for a vote with a 24 HR preveiw before the vote (I'm not a speed reader & I always try to disect correspondance before saying aye or nay). I feel that this is the problem our Congress has set up for years w/o considering the unintended consequences of their actions.

I also feel that there are some people out there that are truly trying to do the best they can but there are those that this was a scam from the beginning and had no intention of honoring their contract. There are so many States that have some great programs to help but there are some that are weak. I have an idea that if they are really want to help the homeowners then why not reach out to the States's Attorney Generals had ask for input; then take what works & create a bill as a baseline for banks to follow.

I still feel that instead of throwing all this money into insurance, banks, mortgage & auto industries why not just give the money spent back to the taxpayers and let them spend it on mortgages, cars or whatever and if after that they loose their home so be it, Just my 2 cents.

Oct 14, 2009 08:55 AM #166
Christine Hynes
American Capital Corporation - Laguna Beach, CA
Orange County Senior Loan Consultant

C - I think this is such a complicated and tough issue.  It is so hard to hear the calls that I receive everyday, some legit and some not as it seems like there is always someone trying to take advantage of the system.  I think that homeowners losing jobs and not being able to afford their payments anymore is difficult. 

The banks on the other hand are doing whatever they can to make money and get money out of homeowners, as it is an  investment and just business to them and the human element is really not high on their list.  Some banks are still making amazing profits and received alot of our Tax Payer Money, then over 140 banks closed this year.

These are tough times and all I can do as one individual is to help one family at a time.  I also think if we all focus on helping one family at a time than maybe we will actually change things.

Dec 05, 2009 11:49 AM #168
Kevin Cottrell
Austin Real Estate Today - Austin, TX

Anything to do with loan modifications and the new and expanded gov't programs seem to be focusing on the successes (albeit limited) with relationship to principal reduction.  I expect this to be a theme in 2010.

Jan 19, 2010 10:38 PM #169
Steve Hula
All Star Real Estate - Clarksville, AR
All Star Real Estate - Team Hula

Unfortunately, the Fannie Mae loan Modification works like this.

If you have missed a couple mortgage payments, and if you can show ability to repay, Fannie Mae will pay your lender to bring your loan current.  They will not reduce your interest rate.  If you have a 30 yr fixed rate at 8% and pay $1,000 month mortgage payment, by the time Fannie Mae "helps" you out, you now owe $1,000 + ($79 month on the 15 yr Fannie Mae 2nd).

Be very careful!  Many of these so called "Loan Modifications" are there to help your banker more than they help you.  And if you now want to do a HUD refine, and were late on a payment during the previous 12 months, you will not qualify.

SO far it's all been "Smoke & Mirrors".  I hope they do something to actually allow a troubled borrower the option to refi into a lower payment.

Mar 17, 2010 01:41 AM #170
Steve Hula
All Star Real Estate - Clarksville, AR
All Star Real Estate - Team Hula
Unfortunately, in the society we live in today, a person can make their mortgage payments faithfully for 29 years, on their 30 year mortgage, and if their employer up and moves to China, they are stuck in a bad way, through no fault of their own.  Are you telling me it is this borrower’s fault, they should have planned better?  Making a mortgage payment on time every month for 30 years may be tough to do for working class Americans.  These are the people, everyday Americans, who this bill is intended to help.
Apr 26, 2015 09:36 PM #172
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