The American Dream

The Senate today turned to legislation designed to address the national housing crisis and help Americans avoid foreclosure. The number of homes facing foreclosure jumped 57 percent in January compared to a year ago, a mortgage research firm said Monday. Nationwide, 233,001 homes received at least one notice from lenders last month related to overdue payments, according to the research firm. The Foreclosure Prevention Act of 2008 would build on recently-enacted economic stimulus legislation by

The Senate today turned to legislation designed to address the national housing crisis and help Americans avoid foreclosure. The number of homes facing foreclosure jumped 57 percent in January compared to a year ago, a mortgage research firm said Monday. Nationwide, 233,001 homes received at least one notice from lenders last month related to overdue payments, according to the research firm. The Foreclosure Prevention Act of 2008 would build on recently-enacted economic stimulus legislation by addressing the foreclosure crisis that has threatened hard-working families, communities, and the national economy.

The bill would:

· Help families keep their homes by increasing pre-foreclosure counseling funds, expanding refinancing opportunities, and amending the bankruptcy code to allow the modification of mortgages on primary residences;

· Help families avoid foreclosure in the future by amending the Truth-in-Lending Act to improve loan disclosures during the original loan and refinancing process;

· Help communities impacted by foreclosures by allowing localities with high foreclosure rates to access Community Development Block Grants funds to purchase foreclosed properties for rehabilitation, rent or re-sale; and

· Help struggling businesses recover by expanding the period from two to five years for losses incurred in 2006, 2007 and 2008 to offset prior years' income

Major Provisions

• Increasing pre-foreclosure counseling funds. The bill wuld provide $200 million in additional funding that would help housing counselors continue their outreach to families at risk of foreclosure. These added funds would help as many as 500,000 additional families connect with their mortgage servicer or lender to explore options that will keep them in their homes.

• Providing an additional $10 billion of tax-exempt private activity bond authority and allowing housing finance agencies to issue bonds for refinancings. It would allow housing finance agencies to use proceeds from mortgage revenue bonds to refinance subprime loans, to provide mortgages for first-time home buyers, and for multifamily rental housing.

This increased lending activity would support economic growth by creating new jobs, generating federal, state, and local revenues, and inspiring home-related consumer spending.

The administration budget for next year included a similar provision to allow tax-exempt qualified mortgage bonds to be used to refinance home mortgages to provide relief for subprime borrowers.

• Changing the Bankruptcy Code to allow a judge to modify the mortgage of a debtor. Title IV of S. 2636 would help more than 600,000 financially-troubled families keep their homes by permitting a bankruptcy judge to modify their mortgages. S. 2636 would eliminate a provision of the bankruptcy law that prohibits modifications to mortgages on the debtor's principal residence for homeowners who meet strict income and expense criteria. With this change, primary mortgages would be treated the same as vacation homes and family farms.

Help communities harmed by foreclosures recover by:

• Providing $4 billion in funding for communities to purchase and redevelop foreclosed-upon properties. Homes that have been foreclosed-upon and are sitting unoccupied on the market can sap neighboring homes of their value, and lead to a cycle of community distress. Title II of S. 2636 allows localities with the highest foreclosure numbers and rates access to Community Development Block Grant (CDBG) funds to use toward purchasing these properties, rehabilitate them if necessary and rent, re-sell or otherwise redevelop them. Productive occupancy of foreclosed homes will help stimulate economic activity and help prevent further loss of home equity in struggling neighborhoods.

Help struggling businesses recover by:

• Providing additional relief for the businesses struggling the most - including America's homebuilders - from the housing crisis. For companies losing money in this economic downturn, Title VI of S. 2636 would extend the period to apply excess net operating losses to income from prior profitable years and receive any applicable tax refunds.

For 2006, 2007, and 2008 losses, the "net operating loss carryback" would be extended to five years from the two years currently in law. By extending the carryback provision, the bill simply accelerates the tax benefit of current losses from future years and gives struggling companies cash infusions they need to stay afloat.

Help families avoid foreclosures in the future by:

• Simplifying disclosure on mortgages documents. The measure would amend the Truth-in-Lending Act to improve the loan disclosures given to individuals and families not only when they apply for a home purchase loan, but also when they refinance their home.