At the urging of Senators John Kerry (D-MA) and Gordon Smith (R-OR) the Senate Finance Committee today included mortgage financing assistance in the economic stimulus package. An estimated 2.5 million mortgages were in default in the third quarter of 2007; devastating entire communities as entire blocks now sit vacant and families are lose their homes.
"At a time when families across the nation desperately need help to avoid foreclosure, these funds will provide thousands of safe, fair mortgages to homeowners facing foreclosure and families looking for their first home," said Sen. Kerry. "By including $10 billion in targeted mortgage relief to the homeowners, we are standing by our pledge to create a targeted, timely, effective stimulus package."
"If we are serious about addressing the root of this economic downturn, we need to take a serious look at the housing crisis," Smith said. "Expanding bonding authority will help homeowners work out their finances instead of having the government bail them out. This is a good way to bring greater stability to the market and ensure families remain in their homes."
Under current law, state and local governments may issue bonds to finance new mortgage loans to first-time homebuyers. Senators Smith and Kerry's provision would temporarily expand the use of this program to include refinancing of subprime loans. The proposal would also allow states to issue up to $10 billion in additional bonds over the next three years. This would allow homebuyers facing foreclosure the opportunity to refinance at a safe, fair rate. Nationwide, it's estimated that the proposal would lead to roughly 80,000 new loans according to the National Council of State Housing Agencies.
The Committee on Finance passed the provision today with overwhelming bipartisan support as part of the economic stimulus package. The bill is expected to come to the Senate floor in the next week.