Senate Seals The Fate Of Plan To Help House Owners Battling Foreclosures

April 7th, 2008 | Tags: Foreclosure House

Both Republicans and practical Democrats killed a plan that would have gone a long way to help besieged borrowers get better terms from lenders in bankruptcy courts. By a vote of 58:36 the plan was nipped in the bud. The hope was that if it had been allowed to see the light of day the real estate market would have benefited.

The proposed legal changes initially had the support of the Democrats. The banks and their GOP allies as well as some Democrats opposed it. It would have authorized judges to reduce rates of interest on shaky mortgages so that the borrower could remain in the house that was his or her home. The underlying idea was that the borrowers could have used this leverage to persuade the lenders to be more reasonable. At one stroke this move would have been more beneficial than all the help envisaged in other clauses of the bill, said Senator Dick Durbin (Democrat). The death sentence on the bill was the handiwork of 10 Democrats and one Independent who joined hands with the Republicans. They argued that despite being trimmed and cut the bill would have done more harm than good because it would have made mortgage lenders spike up further the interest rates. However the bill is generous to those who have suffered losses in the construction industry without doing much for those who are losing their houses to foreclosures.

The bill is being advertised for helping the foreclosure victims together with enabling the real estate market to recover. Developers and banks have been relieved by tax cuts amounting to $25 billion but relatively little has been done for the individual humble house owner. This estimate comes from no less a body than the Joint Tax Committee. The latter explores the effect of various tax measures on the Treasury. A whopping $4 billion will be given to towns and cities to purchase and then repair foreclosed abandoned houses. It is expected that it will help the neighbourhoods. The house owners would benefit from a sanction of $100 million to avail of counseling and to negotiate with lenders. By the bill the states are authorized to issue bonds ($10 billion) for modifying sub-prime mortgages. Although the provisions have been given sweeping support there is no doubt that it is business-friendly and gives lesser importance to the hapless foreclosure victim.