U.S. Rep. Barney Frank wants to use some of the interest from the government's financial industry bailout to help unemployed homeowners struggling to keep up with their mortgages.
While exotic mortgages received much of the focus during the foreclosure crisis, high unemployment places a new group of homeowners at risk.
Frank, chairman of the House Financial Services Committee, said some homeowners who took on conventional mortgages at reasonable prices are now in trouble after losing their jobs.
"You cannot afford mortgage payments, even reasonable ones, on unemployment benefits," Frank, D-Mass., said during a news conference outside Bay Village apartments.
Frank visited the public housing development with U.S. Secretary for Housing and Urban Development Shaun Donovan and Gov. Deval Patrick to highlight the use of federal stimulus for energy efficiency projects. Frank and Donovan, who visited Fall River earlier in the day, also discussed foreclosures.
To help the unemployed avoid foreclosure, Frank said he wants to use some of the profits the government is making in the $700 billion Troubled Asset Relief Program.
He proposes the federal government lend that money to people with "reasonable mortgages" who cannot make their payments because they have no job. The homeowners could repay the loan at lower interest rates when they get jobs.
Frank said he would support an extension of the bailout program if it includes that provision.
"If the TARP is used going forward in these socially responsible ways, then I think it could be useful," he said.
In addition to Frank's proposal, Donovan said the Obama administration's mortgage-modification program has led to trial modifications for about 650,000 borrowers as of Nov. 1, with nearly 15,000 modifications in Massachusetts.
He said the numbers are better than expected for this stage of the program, and foreclosure activity has declined nationally in the last three months.
"We're making progress, but the truth is we have a long way to go," he said. "Foreclosures are still too high, largely driven by unemployment today. That's where most of the new foreclosures are coming from."
Asked afterward about concerns that many trial modifications may never become permanent, Donovan told The Standard-Times the administration is focused on challenges, such as the trouble families have in putting together the necessary paperwork.
"I think you'll see some that will not convert, but I think you will see a very, very large number that do convert and are permanent," he said.
The main focus of the Bay Village visit was a $1.5 million grant the New Bedford Housing Authority received. The authority will use the money, which comes from the federal stimulus package, to pay for a miniature cogeneration plant at Bay Village to produce both electricity and heat.
The authority will use it to meet some of the development's power needs, cutting utility costs as a result. The authority will also sell heated water to the YMCA.
Donovan said during the news conference that 40 percent of carbon emissions come from buildings nationally, and retrofitting buildings is an important goal.
"This could be a key way in our strategy across the country to lower greenhouse gas emissions and to build a new, strong economy with more jobs going forward," he said.