New Housing Bill Will Force Loan Modification

Reblogger Ruthmarie Hicks
Real Estate Agent with Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605

Ever since the taxpayers of America threw a ton of money at the failing banks - we have been patiently waiting for the banks to loosen credit, fund loans in a timely manner, streamline the short sale process and help those who might be able to avoid foreclosure to stay in their homes through loan modifications.  Instead of doing what was expected of them - the banks vaulted the money, threw away the key. Foreclosures increased, short sales became harder and harder to get and let's not even start on loan modification...FORGET ABOUT IT!

I don't know whether this bill would have a prayer in the Senate...but I do think that it is a long overdue for Congress to tell the banks that this behavior won't be tolerated.

Original content by Claudette Millette

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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Tim Lorenz
TIM LORENZ - Elite Home Sales Team - Mission Viejo, CA
949 874-2247

Now this is truely interesting I would like to read more on the actual bill and see how it will roll out.

Oct 06, 2009 05:12 PM #1
Ken Cook
Content, coding, marketing, host. - Marietta, GA
Content Marketer/Creator

It will be interesting to see how this bill does in Congress. There are two sides to every coin - as well all know!

Oct 06, 2009 05:12 PM #2
Julia Odom
Select Realty Professionals - Chattanooga, TN
Chattanooga Homes for Sale

I hate to be a cynic but I was reading an article the other day that specified the number of loans that had been modified but had fallen back into default. I can't remember the numbers now but it was very discouraging. In some really  hard-hit areas, unless the mod includes a significant principal reduction there isn't always a lot of incentive for the home owner to stick around even if the terms become affordable.

Oct 07, 2009 01:00 AM #3
Ruthmarie Hicks
Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605 - White Plains, NY

Hi Tim,

I wonder how this is going to play out.  Congress seems to be owned by insurers and banks.  The corruption is so bad, I don't hold out that much hope.

Julia - I too am cynical - I think some of the problems is these modifications aren't realistic.  Some have increased payments - not decreased.Modifications have to be realistic to the home owners circumstances to be effective.


Btw, there is quite a discussion going on the original poster's blog - please be sure to check it out.

Oct 07, 2009 07:27 AM #4
Phil Hanner
Keller Williams - Daytona Beach, FL
Phil at


Ruthmarie - you posted the following on active rain:

"You don't like the middle class reclaiming their country?  I will give you the same advice you methuglicans gave me during 8 agonizing years of SHRUB - MOVE!!! PLEASE just GO!!! Try China - the dog eat dog mentality of that totalitarian nation would suit your politics just fine. You lost a major election and those who won are trying to undo the mess that you made.

Recourse to cover their losses?  They are reporting huge profits and they are hoarding the money the taxpayers gave them in vaults.  You know...the same taxpayers that need help because they lost their jobs or were so foolish as to get sick while thinking their health insurance would cover them. If these monster banks continue their consolidation, they are inviting antitrust action.  Btw, BUSH started the bail out and was stupid enough not to attach strings. They took the money and ran. The banks need to forced into submission and if they don't comply they need to split up like Standard Oil at the turn of the 20th century.

I know several people waiting for loan modifications.  Hell will freeze over before the banks respond.  They want the foreclosures because it is more profitable for them than a loan modificaiton or a short sale.  Haven't we been hoodwinked enough by these greedy banks?  Good God."

Do you not realize that the banks are often lending other people's money? Do you not realize that this period of disintermediation is caused by the relationship between banks and those with money to lend?  My Dad's pension fund invested in mortgages. Now the borrowers want to break their agreement and not pay back what they owe.

Hundreds of elderly retirees are going to have benefits cut because people don't want to pay. The pension fund won't support modifications because the vast majority of the people they loaned to CAN afford to pay. These borrowers see their neighbor getting a deal and they want one too. Even when their income shows they can easily make the payment.

I am amazed at the level of hate being spread around and also amazed at how ignorant some supposed "professionals" are about finance and banking. Very disappointing.

Yes SOME banks are making profits - which you apparently think is bad. Many banks are out of business and MILLIONS of people have lost money invested in mortgages. Follow the money and corruption - it leads straight to Fannie and Freddie. This crash has been coming since the 70's  -  remember 20% down? That was claimed to be redlining. Eventually the banks were threatened with their charters. We are headed that way again. Yes the banks are partly to blame - but the federal gov't set them on this path many years ago.

Oct 12, 2009 06:58 AM #5
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