The Senate passed housing bill that aims to prevent foreclosure won by 91 to 5. Possibility of shifting from a risky credit to a more manageable one may sound good for troubled homeowners, but others sees this as a risk for taxpayer’s money. But the Senate needs to act on saving the economy from further failure.
Senator Harry Reid admits that it may take more time before the housing industry fully recovers, but with this housing bill, preventing foreclosures may come faster and easier.
But this passed bill does not include the President’s previously promised bankruptcy provision. This condition that could have permitted bankruptcy judges to decrease a troubled payer’s mortgage was rejected in a 45 to 51 vote. According to the head of the Banking Committee Senator Christopher Dodd this issue is now irrelevant.
The said foreclosure preventing bill would also hire extra hundreds of FBI agents and DAs that would look at mortgage frauds. This would also start a $5 million independent commission that will investigate on the root of the financial crisis and create a good route for us to forward.
The housing bill would also develop the $300 billion worth program “Hope for Homeowners”. This assists lenders to write individual mortgages to troubled homeowners who agree to pay premium insurance. This program that hopes to help homeowners shift from a high interest rate to a 30 year fixed loan assisted by the Federal Housing Administration will expire on 2011.
But Hope for Homeowners seems to be ineffective with its strict eligibility requirements. From its targeted 400,000 homeowners, only one has completely done the refinancing process while only 51 more are undergoing the process.
But the current housing bill hopes to stop foreclosure by expanding eligibility. Unlike Hope for Homeowners’ policy of not allowing intentional defaulters, the Senate bill would limit to defaults that occurred within the last 5 years.
Republicans backed the proposal to expand the program by utilizing $2 billion of the $700 billion bailout fund of Wall Street. But some Republicans like Senator David Vitter thinks that burdening the government with more risky mortgages, though it can prevent foreclosures, could eventually rebound to bigger problems in the future.
Another concern is if Hope for Homeowners can be enough to prevent foreclosures, after knowing that voluntary lender efforts have not given decent loan discounts. Less than half of the loan modifications made near the end of last year exceeded 10 percent.