Bill To Help Foreclosure Victims Continues To Be In Limbo

July 14th, 2008 | Tags: Foreclosure Victims

The Senate strongly voted in favour of passing a jumbo foreclosure rescue passage that will help thousands under stress. But this bill scheduled to help foreclosure victims continues to be in limbo. There are still many miles to go.

The Senate played its part by clearing the bill by 84/12 early on Thursday afternoon. But the leaders of the House are thinking of rewiring key issues. White House continues with its threat of veto.

Basically the bill will allow the Federal Housing Administration to support new loans totaling to $3 billion. It will enable foreclosure victims to move into more viable fixed mortgage rates. The lenders however would have to agree to waive a sizeable amount of the principal loan. By this way in the long run the lenders would not be losers. They will get back a good amount of the money they had forwarded by avoiding the costly, time and energy consuming judicial process of foreclosure. At the end of the road they would have found themselves saddled with the ownership of a foreclosed house, which they will find difficult to sell – considering the present mood of the real estate market.

The main architect of the bill, Senator Dodd commented, “Unless we act and do so promptly we’re going to look at a situation that only gets worse.” Dodd is the chairperson of the Banking Committee. He advised that if the bill got passed it will dispel growing fears in the country about the capability of the government to do something effective for the suffering people.

The bill will modernize the fundamentals of the FHA by creating new regulations having tighter holds on Fannie Mae and Freddie Mac. The latter two are government backed mortgage bodies.

The bill will also provide for $14.5 billion in tax breaks for housing. First time nest builders will be to avail of a credit of $8,000.

The Democrats in the Congress are divided over small but vital points related to the bill. These include limits to loans that FHA will insure and which Fannie and Freddie will purchase. The Senate limits it at $625,000 while the leaders of the House, including Nancy Pelosi the speaker (Democrat, California) wants it to be capped at $730,000. The immediate effective date of the plan is also under dispute. Some prefer phasing out operations within a time span of six months.