Clinton Introduces Legislation to Prevent Foreclosure
Legislation Would Encourage Mortgage Modifications that Would Provide Immediate Relief for Homeowners Facing Foreclosures While Protecting Families and Investors
Senator Hillary Rodham Clinton today announced that she has introduced legislation to address the current housing crisis that is threatening millions of families with foreclosure and creating instability in our financial markets. Based on legislation introduced in the House by Congressmen Paul Kanjorksi (D-PA) and Mike Castle (R-DE), the Mortgage Enhancement and Modification Act would encourage mortgage lenders to seek practical and responsible mortgage modifications or other loss mitigation efforts for homeowners facing foreclosure, without the fear of legal exposure. The legislation would facilitate the modification of unworkable, and in many cases, predatory terms of many current mortgages to be rewritten to ensure that homeowners would be able to maintain regular payments, keep their houses, and not be subject to more fees or penalties.
"Mortgage modification is one of the most effective ways we can prevent this foreclosure crisis from hemorrhaging into catastrophe for the millions of homeowners worried about making their next mortgage payment. Moreover, mortgage modification will help stabilize the financial market at a time when the housing crisis has already resulted in trillions of dollars in losses of housing wealth and investment capital.
"We must also ensure continued investment in the housing market by preserving all contractual obligations, upholding the rights of investors and keeping open the ability to raise capital from investors to fund future housing opportunities. Keeping families in their homes should be our top priority, and mortgage modifications are the smart way to realize that goal," said Senator Clinton.
Many of the current voluntary efforts for modification have been hindered by mortgage lenders' anxiety over lawsuits from their investors who believe their interests are represented by foreclosure and not modification. However, in most instances, modification of impractical mortgage terms can keep a family in their home and still yield a greater rate of return for investors than a foreclosure.
Many government regulators, officials, mortgage lenders and non profit consumer groups have stated that a small legal clarification that would protect mortgage modification efforts from legal exposure while balancing the interests of investors would go a long way towards stemming the current crisis and restoring confidence and stability in the markets.
Senator Clinton's bill is a carefully and narrowly crafted proposal that would:
* Clarify that there is no legal exposure for lenders that engage in mortgage modifications that will keep families in their homes and provide better payment terms while maintaining their duty to maximize benefits for, and not harm the bottom line of the investors they serve.
* Ensure that mortgage modifications or workout plans actually benefit homeowners by stopping foreclosure and offering better and more practical loan terms
* Ensure that only mortgages covering owner occupied homes would be able to benefit from the provision so that speculators could not take advantage of the protected modifications
* Enable lenders to waive abusive prepayment penalties, freeze ARM rates, or enact better payment schedules, write downs and payouts, if it helps the borrower and would be consistent with the interests of the investors the lenders serve
* Ensure that mortgage modifications do not harm homeowners in any way with hidden fees, additional penalties or negative amortization at any time and requires servicers to tell the homeowners the terms of the modification in easy to understand language
* Preserve the rights of investors by reaffirming the obligations, duties and expectations of the mortgage servicers to benefit, and not harm their investors
* Ensure that all contractual or legal agreements are honored and nor would codes of conduct servicers are not diminished since the bill does not protect any type of action that is specifically prohibited by a contract between an investor and a servicer
* Ensure that the legal clarification defined in the legislation does not affect other implied or specific duties, responsibilities and obligations of the mortgage servicer to investors they serve.
Efforts to encourage mortgage modification, like Senator Clinton's, have been applauded as a necessary component in addressing the foreclosure crisis by a wide range of public officials, housing industry groups and consumer protection organizations.
"I commend Senator Clinton for her leadership and legislation to help address some of the difficult mortgage problems currently affecting many homeowners who face potential foreclosures," said Congressman Paul E. Kanjorski, the Chairman of the House Financial Services Capital Markets, Insurance, and Government Sponsored Enterprises Subcommittee. "Senator Clinton's legislation contains many similar provisions to the legislation I recently introduced in the House. Both of these bills aim to streamline the mortgage loan modification process. With Senator Clinton's bill, we now have mortgage loan modification legislation pending in the House and Senate, which will greatly help to advance such issues through the legislative process."
"The bill would not override any inconsistent conditions in the contract between the servicer and the investors," said Richard F. Gaylord, President of the National Association of Realtors. "This approach shows promise for addressing one of the most serious problems faced by homeowners facing foreclosure."
"It is our belief that Senator Clinton's proposal is exactly the kind of intervention needed to take our country in the right direction. Protection of servicers from suites brought by investors who seek to modify toxic loans speaks directly to one of the major barriers that have stood in the way of curing the problem," said Lee Beaulac, Senior Vice President of Rural Opportunities Inc. "ROI is pleased to support this effort. We applaud Senator Clinton's leadership on this issue and we are very happy to see her take this issue on directly and effectively for the benefit of millions of American citizens who find themselves victims of aggressive and irresponsible lending."