WASHINGTON, D.C. – October 06, 2008 – (RealEstateRama) — United States Senator Dick Durbin (D-IL) sent a letter today asking the heads of the Federal Reserve, Federal Housing Finance Authority, Federal Deposit Insurance Corporation and the Secretary of the Treasury to aggressively and quickly work to minimize home mortgage foreclosures. Today’s passage of the Emergency Economic Stabilization Act gives the federal government control over a large share of the U.S. mortgage market and sweeping new powers to make loan modification which could help to prevent hundreds of thousands of foreclosures nationwide.“The federal government now owns or has a controlling interest in a large percentage of the outstanding mortgages in America. With that control and influence comes responsibility,” Durbin wrote. “By facilitating a systemic restructuring of the hundreds of thousands of mortgages that currently cannot be paid, you can bring greater stability to the housing markets, the affected families, and the surrounding communities.”
The collapse of the subprime mortgage market has put more than 2 million families in danger of losing their homes and cause nearly 750,000 homes to be lost to foreclosure in the last year. The Center for Responsible Lending predicts that foreclosures on risky, subprime loans will negatively affect neighboring homeowners and surrounding communities to the tune of nearly $225 billion in the coming years.
The Emergency Economic Stabilization Act requires these four entities to “implement a plan that seeks to maximize assistance for homeowners.” It further calls for the modification of mortgage interest rates and/or the reduction of the loan principal where possible. Durbin strongly encourages each agency to use its new authority so that as many families as possible can stay in their homes and return to making timely payments to their lenders.
Last year, Durbin introduced the Helping Families Save Their Homes in Bankruptcy Act. That bill would allow families to alter the terms of their mortgage while in bankruptcy, allowing them to keep their homes while paying off their obligations. That bill was not included in the Emergency Economic Stabilization Act, and therefore it is critical that these regulators use the authority granted in this bill aggressively.