June 10, 2010
The Honorable Christopher Dodd
The Honorable Barney Frank
Re: Preventing foreclosures for the unemployed
We strongly encourage the Conference Committee to support inclusion of the House passed provision to create a loan program for jobless homeowners in the final version of the Financial Reform bill they are negotiating this month. This provision is in Title VIII, Section 10001 of HR 4371 as passed by the House.
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.
Home repossessions climbed to a record high in April (92, 432), up 45% from a year earlier. Nearly 5% of all mortgages were in foreclosure in the first quarter of 2010, also a record, as high unemployment rates and lack of capacity overwhelmed attempts to modify loans by mortgage servicers.
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.
We strongly encourage the Conference Committee to support inclusion of this provision for a loan program for jobless homeowners in the final version of the bill that they are negotiating this month. 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.
For more information, please contact John Dodds 215-557-0822 ext. 102 or www.Philaup.org
Sincerely,
Americans for Financial Reform
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