Lawmakers Mull over Foreclosure Bill

March 10th, 2008 | Tags: Foreclosure

A proposal initiated by Governor Timothy M. Kaine allowing house owners facing foreclosures to be given more time and information was to the floor of the House of Delegates. It got endorsement by 19 to 3 from the House Commerce and Labor Committee. On the same day the Mortgage Banker’s Association announced that foreclosure numbers reached record heights across the country during the last quarter of 2007 and indications are that this trend will continue.

Some of the legislators, like Bill Janis (Republican), however refused to admit of the existence of any such problem; hence no need for urgency. The argument was that less than 1% of all mortgages were in foreclosure. Janis further argued that resale of foreclosed houses at bargain rates provided a good chance to many first time buyers. It was his own personal experience of having bought a foreclosed house after being discharged from the navy. Had such an opportunity not come his way perhaps he would never have been able to afford a house of his own! Jennifer McClellan (Democrat) crossed swords by saying that foreclosures brought down the value of neighbouring house. With more rates ready to be reset more and more houses are in danger. She wondered if this is not a crisis then what is one?

The general opinion is that the sub-prime mortgages with floating interest rates are responsible for this calamity. The bill targets those house owners who are saddled with this type of mortgages. It stipulates that the lenders would have to give at least 10 days prior warning before hiking rates. The lender must also give information about the counseling agencies approved by the government. The lender must also offer a 30 day extension if so requested. If the borrower fails to respond within the agreed time then the lender would be free to proceed with foreclosure steps.

Many legislators opine that lenders have already come forward greatly to help keep the borrowers in the houses that are their homes. So in this crisis there is nothing much extra that this bill is doing says Republican Chris B. Saxman. Republican Frank Delgrove comments that the bill does not scratch the banking industry but it might help the hapless borrower. So there is no reason for not going ahead with the bill. The bill will have to go back to the Senate to cross several technical hurdles. If made into law it will be in force till July 2010.