June 22, 2010
The Honorable Christopher Dodd
The Honorable Barney Frank
Re: AFR positions on proposed House offer on Title XIV
We write on behalf of Americans for Financial Reform regarding the proposed House Conference offer on Title XIV of the financial reform bill, relating to the Mortgage Reform and Anti-Predatory Lending Act. We support House offer #1, #2, and #3 to Title XIV, including the $3 billion fund to assist homeowners facing foreclosure due to unemployment or medical debt; the authorization of funding for nonprofit lawyers assisting homeowners facing foreclosure; and additional funding for the Neighborhood Stabilization Program to support state and local efforts to purchase and redevelop foreclosed and abandoned homes.
1) Assistance for Unemployed Homeowners: This provision could help many hundreds of thousands of homeowners prevent needless foreclosures due to temporary unemployment and fill a major gap in current foreclosure prevention efforts.
Unemployment is now the leading cause for delinquency for families facing foreclosure. A recent study by NeighborWorks looking at reasons that people are falling behind on their mortgages found that 58% of delinquent homeowners were behind due to job loss. This has had a particular impact on minority communities who face high rates of joblessness.
The Obama Administration’s foreclosure prevention program, Making Home Affordable, was designed to assist homeowners in costly subprime loans. It has had mixed success dealing with that population. However, the only provision focused on the unemployed guarantees a mere three month’s forbearance to those without jobs. This is totally inadequate and offers homeowners little more than is already the practice in the private market.
Long term unemployment is at historic highs in the nation with the average worker out of work for eight months and with 6.7 million or 45% of the jobless classified as long term unemployed. Prime foreclosure rates have risen steadily as a result. Thus, we currently have a foreclosure prevention program which effectively leaves 58% of threatened homeowners (the unemployed) with no useful assistance.
The House bill includes a provision in Title VIII that creates a program to assist unemployed homeowners facing foreclosure. It is funded by $3 billion in TARP funds already allocated for foreclosure prevention activities. These funds would enable HUD to provide short term bridge loans of up to 24 months to laid off homeowners to give them time to become reemployed.
2) Legal Aid Foreclosure Prevention: It is well known that homeowners who have legal representation have a much better chance of successfully navigating the HAMP foreclosure prevention program, which is the main government foreclosure-prevention effort. Yet funding for non-profit legal aid attorneys is becoming increasingly scarce even as the demand continues to escalate. An authorization of $35 million – while admittedly a very small sum compared to the HAMP program funding or other economic recovery efforts – can be leveraged significantly by the legal aid community to make a real difference for homeowners.
3) Neighborhood Stabilization Program: Although we wish it had been otherwise, foreclosures have already devastated many neighborhoods, and significant investment is now required to bring back affordable housing and healthy neighborhoods.
We appreciate your interest in our views. Thank you again for your commitment to crafting strong and effective foreclosure prevention measures within the new legislation.
Americans for Financial Reform