Financial Reform Act to Save Millions From Foreclosure

By Mike Colpitts

Millions of homeowners facing the risk of foreclosure may be helped under a special provision included in Congress Financial Reform Act. The plan is modeled after a Pennsylvania program that has aided more than 43,000 homeowners at risk of losing their homes.

Congressman Chaka Fattah

Congressman Chaka Fattah (D-PA) sponsored the measure as a way to help unemployed homeowners from losing their homes to foreclosure. The bill must still be approved by the House, and has already been approved by the Senate, receiving broad support from Democrat and Republican lawmakers. Some $3-billion in funding for the program will come from the Troubled Asset Relief Program (TARP) for unemployed homeowners.

The legislation requires mortgage lenders to inform homeowners in default on their mortgages of the program before they can start formal foreclosure proceedings. Mortgage holders will undergo an application process to be approved for the program and receive a loan of up to $50,000 in assistance to help pay monthly payments for as long as 24 months.

Homeowners approved for the plan will make a partial loan payment to the Department of Housing and Urban Development instead of their lender. An estimated 5.5-million homeowners are currently in default of their mortgages. HUD will pay the rest of the payment with TARP funds until the homeowner can start making full payments again after finding work. The homeowner will then be required to pay back HUD in full.

The nationwide program, if approved as part of the financial reform legislation as expected is intended to help millions of homeowners who have lost their jobs as a direct result of the financial crisis.

Pennsylvania’s Homeowner’s Emergency Mortgage Assistance Program (HEMAP) has provided $236 million in similar loans to unemployed workers to stave off the foreclosure process. “This funding will help so many Philadelphians and homeowners across the country who risk losing their homes after falling on hard times through no fault of their own,” said Philadelphia Mayor Michael Nutter.

Fattah introduced the provision in the House realizing that more than 7-million homes have already been taken back by bankers in the foreclosure crisis. Rising unemployment leaves millions more in jeopardy of losing their homes. “American’s need help. Eight percent of all mortgage holders are currently at risk of losing their homes and that is unacceptable,” Fattah said. “I’m encouraged that my colleagues supported my legislation in both the House and the Senate to ensure that families won’t be faced with the double blow of being unemployed and homeless.”

Tom Cochran , CEO of the U.S. Conference of Mayors praised Fattah for his work to help unemployed homeowners. “The additional funds will certainly be welcomed by the nation’s mayors who work daily to prevent mortgage foreclosures that are still ravaging too many families and neighborhoods in our nation.”

Congress hopes to have financial reform finalized and ready for the president’s desk by the July 4th recess.

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