Reed Introduces Bill to Help More Rhode IslandersSave Their Homes From Foreclosure
PROVIDENCE, RI -- With the number of foreclosures tied to subprime mortgages on the rise, U.S. Senator Jack Reed (D-RI) today unveiled comprehensive legislation to expand access to foreclosure prevention services to homeowners who are experiencing financial hardship. The Homeownership Protection and Enhancement (HOPE) Act of 2007 is a $615 million initiative that will help prevent financially distressed homeowners from losing their homes and assist in steering more people away from the brink of foreclosure. There were 1.2 million foreclosures reported nationwide last year, up 42% from 2005, according to RealtyTrac, a database of foreclosed properties. RealtyTrac also reports 430,000 foreclosure filings in the first-quarter of 2007, a 35% jump over the same period in 2006 "The increasing rate of foreclosures across the country is troubling. Not only are individual families losing their homes and their financial nest eggs, but foreclosures can have a negative ripple effect across communities and the economy," said Reed, a senior member of the Banking Committee, which oversees federal housing policy. "The HOPE Act will help states establish and enhance outreach programs to proactively find homeowners at risk of losing their homes and help them avoid foreclosure." Foreclosure rates are on the rise in Rhode Island. In 2006, Rhode Island had the highest home foreclosure rate in New England and exceeded the national average. According to First American Loan Performance, in 2006, nearly 16% of all home-purchase loans in Rhode Island were subprime or "interest only." However, as home prices have declined, many people who took out these exotic loans are now finding they owe more than the value of their property. "We need better protections to help people from losing their homes," said Reed. "The money in this bill will reward states that have already set up effective programs to help curtail foreclosures with additional funding and resources. It will also provide an incentive for more states to reach out to delinquent borrowers, provide them with financial counseling, and, when appropriate, help them negotiate a plan to restructure their debt." The Center for Responsible Lending estimates that one in five subprime loans originated during the prior two years will end in foreclosure, costing homeowners $164 billion, mostly in lost equity. The HOPE Act would provide: " $50 million for the creation and operation of State Homeownership Protection Centers. The centers can serve as a one-stop resource, offering consumers a broad range of services and assistance, such as providing financial assessments, counseling, or referrals to families in need." $260 million in federal funding to states who operate State Homeownership Protection Centers for revolving loan funds to offer one-time grants or subsidized loans to qualified families." $300 million to increase funding for effective HUD-approved counseling agencies." $5 million for the creation of a federal database on defaults and foreclosures to improve oversight of public and private efforts to sustain homeownership. To help prevent future borrowers from taking on unsustainable mortgages and falling into foreclosure, the HOPE Act would also establish new federal guidelines to: " Create an affirmative duty for lenders and servicers to engage in reasonable loss mitigation prior to foreclosure." Require notifications by lenders to provide borrowers with information on the full array of counseling services available in their state at every critical step - at application, at closing, and upon delinquency. " If a state has a State Homeownership Protection Center, require lenders and servicers to refer delinquent borrowers to the center so that it can proactively attempt to reach distressed borrowers. Reed noted that when a house gets foreclosed on, it is not just the borrowers and lenders who pay the price, whole neighborhoods can suffer. Housing industry experts estimate that for every foreclosure within an eighth of a mile of a house - two and a half city blocks in every direction - the surrounding home's property value drops by about 1 percent. "The federal government has a responsibility to step in and ensure that millions of Americans - people who never took out a risky loan and have scrimped and saved to pay their bills on time - are not adversely affected by the subprime foreclosure crisis," concluded Reed. "This legislation is not a bailout, it is targeted relief that will help more families keep their homes and save communities nationwide millions of dollars. We need to act swiftly before personal financial tragedies turn into a full blown national financial crisis."