House panels approved three pieces of legislation Wednesday that will be part of a housing stimulus package to be debated on the floor during the first week of May.
The House Financial Services Committee approved two measures: one that would provide $15 billion to states and cities to buy and rehabilitate foreclosed homes so they can place families back in them; and another that would remove legal liability from the loan servicer who readjusts an at-risk mortgage to make it more affordable for the borrower.
By a 38-26 vote, the panel approved a bill by Housing Subcommittee Chairwoman Maxine Waters, D-Calif., that would provide $7.5 billion each for grants and loans based on a state’s percentage of foreclosures over the past year, adjusted to its median home price. Three Republicans, Reps. Steven LaTourette and Deborah Pryce of Ohio and Christopher Shays of Connecticut, supported the bill.
The zero-interest loans would be repaid to the federal government from proceeds of a resale or, in the case of a rental, a refinance.
The grants could be used to cover property taxes and insurance until the residence becomes occupied again. The Senate-passed housing measure would provide $4 billion in Community Development Block Grant funds to cities for similar activities.
The panel also approved by voice vote the bill that would grant a legal safe harbor to servicers who restructure a mortgage.
Rep. Michael Castle, R-Del., argues his bill is needed because servicers are having difficulty in modifying loans because of threatened lawsuits from investors who own a portion of the mortgage.
The bill would limit the protection to workout plans initiated before 2011 and specifically to owner-occupied properties. It would have to remain in place for five years and the new loan could not result in additional points and fees.
The committee adopted a manager’s amendment to the Castle bill that would reaffirm that consumers could still sue lenders for fraud or abusive lending practices.
It also would clarify that the servicer could consider foreclosure proceedings if that was the best option available, as well as specify that the ban on negative amortization for any loan workout covered under the bill would not apply to adding delinquent interest into the new loan.
Similar language is contained in a Senate bill by Banking Chairman Christopher Dodd that would allow the Federal Housing Administration to refinance up to $400 billion in loans on the verge of foreclosure. The House Financial Services Committee will mark up its FHA foreclosure bill today.
Meanwhile, the House Veterans Affairs Economic Opportunity Subcommittee approved legislation Wednesday that would ban foreclosure proceedings against service members for at least one year after military service. The current limit is 90 days.
Those bills, as well as a separate measure that would provide $11 billion in tax breaks for first-time homebuyers and developers of low-income housing projects, will be part of the package to be considered on the House floor the week of May 5.
This article appears in the April 26, 2008 edition of NJ Daily.