Industry Thwarts Action on Bill to Stop Foreclosures and Strengthen Economy
February 29, 2008 – Yesterday the mortgage lending industry successfully stopped a Senate bill, “The Foreclosure Prevention Act” from moving forward. This bill (S. 2636) includes key provisions that would prevent well over 1/2 million foreclosures and avoid property declines of $200 billion. “While many members of Congress are working hard to prevent foreclosures, some members of the lending industry are preventing legislation that Americans desperately need,” said Michael Calhoun, President of the Center for Responsible Lending (CRL). “Congress has recognized that we need a bipartisan solution to stop foreclosures and further damage to the economy.”
The Senate bill is particularly critical given that the foreclosure crisis is getting worse. Recent industry projections are that half of outstanding subprime loans securitized in fourth quarter 2006 will end up with the families losing their homes to foreclosure. Analysts anticipate that two million people will lose their homes over the next two years, and a recent report by CRL shows that 40 million households paying their mortgages on time will also see their home values decline by $200 billion as the foreclosures continue to mount. (Sources listed below.)
Legislation is urgently needed that would allow lenders and loan servicers to modify mortgages to allow families to continue paying on their loans and keep their home. A key provision of S 2636 would provide judges the authority to modify harmful mortgages marketed by subprime lenders in recent years, and would help more than 600,000 families stuck in bad loans keep their homes.
“We simply can’t afford to let the industry that created this epidemic—and is now being consumed by it—dictate the terms of the clean-up,” said Wade Henderson, president and CEO of the Leadership Conference on Civil Rights. “And we can’t let our Senators forget that they work for their constituents, not the lending industry.”
Action on S. 2636 could come before the Senate again as early as next week. For more information, contact Kathleen Day at (202) 349-1871 or Sharon Reuss at (919) 313-8527.
Sources
Represents foreclosure projections on $34 billion in outstanding subprime loans securitized in 4Q2006: Glenn Costello, “Update on U.S. RMBS: Performance, Expectations, Criteria,” Fitch Ratings at p. 18. Available at http://www.fitchratings.com/corporate/sectors/sector.cfm?sector_flag=6&marketsector=2&body_content=about
Two million to lose homes in next two years: Moody’s Economy.com, http://judiciary.house.gov/media/pdfs/Zandi080129.pdf.
Spillover effects of foreclosures: Center for Responsible Lending, Suprime Spillover, http://www.responsiblelending.org/issues/mortgage/research/subprime-spillover.html
About the Center for Responsible Lending
The Center for Responsible Lending is a nonprofit, nonpartisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices. CRL is affiliated with Self-Help, one of the nation’s largest community development financial institutions.
