The House Financial Services Committee voted 38-26 in favor of H.R. 5818, the Neighborhood Stabilization Act of 2008, which would established a loan and grant program administered by the Department of Housing and Urban Development that would fund the purchase of foreclosed properties by local governments.
Funds would be distributed to areas with the highest foreclosure levels, and would be used to turn foreclosed properties into housing for low-income families.
The bill does not have the strong support of House Republicans, including Rep. Spencer Bachus (R-AL), who has said he thinks the bill incentives foreclosures and rewards lenders, investors and speculators in possession of the vacant and foreclosed property. Committee Chairman Barney Frank (D-MA), who strongly pushed for the bill’s passage, has said that he believes the bill contains protections that will prevent its abuse.
Earlier Wednesday, the House panel also passed H.R. 5579, the Emergency Loan Modification Act, without a vote. The proposed bill would seek to shield mortgage servicers from legal liability arising out of bulk loan modifications that may violate existing Pooling and Servicing Agreements, and is strongly opposed by many industry groups.
Congressmen Michael N. Castle (R-DE) and Paul E. Kanjorski (D-PA) originally introduced the bill in mid-March.
“I think it’s in the best interests of at-risk homeowners and investors to work out payment terms that give a homeowner financial stability and the investor some return for their investment,” said Castle. “Without this legislation, I am concerned that lawsuits could bring modifications to a halt.”
FHA reform work begins
The House Financial Services Committee begins work today on FHA reform via the H.R. 5830, FHA Housing Stabilization and Homeowner Retention Act. The bill would allow the Federal Housing Administration to back as much as $300 billion in refinanced loans for homeowners who are facing foreclosure, a move that its supporters say would help troubled borrowers stave off foreclosure.
Early debate from House panel members on Thursday morning focused on counseling requirements, with local lawmakers suggesting that more Federal funds would need to be appropriated for troubled borrower counseling — some House representatives even argued that new Federal funds were needed to fund consumer attorneys who would defend homeowners against foreclosure and eviction actions.
“These people are at the mercy of the lender and servicers in this case,” said Rep. Melvin Watt (D-NC). “They don’t have the legal background that the lenders have needed to defend themselves.”
Watt said consumer counseling doesn’t help borrowers completely, and that he wanted funds appropriated from the Neighborhood Reinvestment Corp. to fund the defense of foreclosure and eviction actions.
Frank voiced supported the proposed amendment as well, in a heated exchange between Housing Republicans and Democrats that set off what is expected to be over a weeks’ worth of discussions covering FHA reform.
“Some legal work is necessary,” Frank said. “The emphasis here is on legal work, not advocacy work.”