Letter From Joseph Lieberman
November 13, 2008
Ms. Cheryl Gregory
2 View St
Plainville
Ct, CT 06062
Dear Ms. Gregory:
Thank you for contacting me to express your thoughts regarding federal efforts to stimulate the housing market and prevent foreclosures. I am happy to respond.
As foreclosures continue to occur at a rate unforeseen in the past 25 years, I believe it is imperative that Congress act to help families stay in their homes. In addition to devastating those who lose their homes, foreclosures also harm neighboring homeowners by lowering property values. In fact, the crisis will cost homeowners not facing foreclosure an estimated $265 billion in household wealth. Additionally, the crisis has caused interest rates to rise, even for prime mortgages — those extended to borrowers with solid credit histories. This increase has made it more costly for Nutmeggers to make new home purchases.
With my support, Congress has taken several steps to address this crisis. On July 26, the Senate passed the Housing and Economic Recovery Act of 2008 (H.R. 3221) by a vote of 72-13. President Bush signed this bill into law on July 30. The legislation includes a number of provisions designed to help struggling homeowners cope with the economic slowdown and avoid foreclosure. Most importantly, it established the HOPE for Homeowners (H4H) Program, which will allow the Federal Housing Administration (FHA) to insure distressed loans for principal residences that have been renegotiated at a significant discount to the borrower. H4H began on October 1, 2008, and will end September 11, 2011. In order to qualify for the program, the loan must be negotiated down to no more than 90 percent of the home’s current value. In addition, H4H is only available to owner occupants and will offer 30-year fixed rate mortgages to those who qualify for the program. The program is voluntary; both the borrower and lender must agree to participate. The Congressional Budget Office (CBO) estimates that this program could help up to 400,000 borrowers refinance their loans. For additional information on this program, you may contact FHA directly at (800) 225-5342 or visit its website at http://portal.hud.gov.
In addition, H.R. 3221 contains an important provision makes it easier for many mortgage servicers to enter into forbearance with distressed borrowers or restructure mortgage terms. Specifically, this provision states that a servicer of pooled residential mortgages is deemed to be acting in the best interests of the investors who currently hold the loan (typically as part of a pool of mortgages called a mortgage backed security, or MBS) if the servicer agrees to or implements a loan modification or workout plan, provided certain other requirements are met. Mortgage servicers had indicated that they were reluctant to alter the terms of home loans because they feared retribution on the part of investors for lowering the value of their investment. This provision should encourage more lenders to work out loan modifications with borrowers and, due to the high costs associated with foreclosure, save lenders and investors money in the long term.
H.R. 3221 also provides additional funding for foreclosure counseling programs; allocates an additional $10.9 billion in tax-exempt bond authority to state housing finance agencies for refinancing subprime loans and extending mortgages to first-time buyers; grants $3.9 billion in additional Community Development Block Grant (CDBG) funding for the purchase and rehabilitation of foreclosed properties in cities that have been hard hit by the crisis; creates a tax credit of up to $7,500 for first-time homebuyers; establishes minimum standards for the licensing and training of mortgage brokers; and temporarily increases the state cap on the Low-Income Housing Tax Credit.
Furthermore, the Emergency Economic Stabilization Act of 2008 (P.L. 110-343), which I supported and which the President signed into law on October 3, contains several provisions designed to preserve homeownership. This measure authorizes the U.S. Treasury Department to purchase troubled assets, including mortgages, from banks as a means of restoring liquidity to financial markets. Treasury is directed to try and modify all of the troubled mortgages it purchases to help these borrowers stay in their homes.
The initial draft of P.L. 110-343 would have repealed an outdated provision of the bankruptcy code that expressly prevents bankruptcy judges from modifying the terms of primary residence mortgages during court proceedings — even though the court can modify the mortgage terms on family farms, vacation homes, and investment properties. Repealing this provision would allow bankruptcy judges to put borrowers on a payment plan to repay a portion of their debts. The Center for Responsible Lending estimates that this could help up to 600,000 homeowners avoid foreclosure on their homes. I supported this provision because I believe that those Americans who are doing the right thing by facing up to their obligations and working out a plan to repay their debt should have the opportunity to keep their homes. Unfortunately, this provision was dropped as part of an agreement reached between the Administration and congressional leaders.
While I am pleased that Congress has taken action to stem the tide of foreclosures, I understand that many Americans are still struggling to keep their homes. This has led some experts to call on Congress to provide additional assistance to struggling homeowners. As a strong supporter of the asset-building opportunity that owning a home provides, please be assured that I will continue to support legislation to help families remain in their homes.
For those homeowners who are in danger of foreclosure, I have added a Mortgage Assistance Tip Sheet to my official Senate website. This site provides a list of several federal, state, and nonprofit resources to help homeowners refinance their loans. You can access the tip sheet at: http://lieberman.senate.gov/documents/mortgagetipsheet.pdf. If you or someone you know is at risk of default or foreclosure, I encourage you to reach out for assistance as soon as possible.
Thank you again for sharing your views and concerns with me. I hope you will continue to visit my website at http://lieberman.senate.gov for updated news about my work on behalf of Connecticut and the nation. Please contact me if you have any additional questions or comments about our work in Congress.
Sincerely,
Joseph I. Lieberman
UNITED STATES SENATOR
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