Foreclosure: The Dangers Of Delay

Apparently the move by a House Committee to extend caps on mortgage and protection for activated service members seems well meaning. But there are hidden risks. It might make it more difficult for the defaulter to keep the roof above the head intact.

The Bill (HR 1315 – The Veterans Benefits improvement Act of 2007) provides protection against foreclosure of 180 days after termination of the person’s services. It also will keep the 6% cap on mortgage interest. The latter benefit had been assured under Servicemembers Civil Relief Act for the same number of days – 180. The Bill was passed by voice vote by the House Veteran’s Affairs Committee. It is one of the five steps that came up for consideration.

Currently the interest cap of 6% applied only for those loans that were started before engagement in military service. It was applicable only for the time on active duty. The current law also provided 90 days for foreclosure protection after termination.

Stephanie Herseth Sandlin, complained that the 180 days protection was not what was originally – a one-year foreclosure protection. Thus it was just a halfway measure. Herseth Sandlin argued that the 180-day respite would a service member, who has fallen behind in mortgage payments while on duty to make up and come up current by selling the house or working out some other arrangement to avoid foreclosure.

Mortgage lenders sent out grave warning signals that with a six-month freeze the foreclosure mess might become murkier. The logic is that the more time a houseowner delays payment the more difficult and impossible it becomes to catch up.

John Boozman described the bill as quite a radical step towards change that attempted but failed to solve the foreclosure by extending the protection to merely three months. These steps have a snowballing effect. So by helping the victims they are being more hurt.

This bill on benefits includes in its agenda some amount of small change in the present adaptive housing grant programmes that allow a disabled member of the services to live temporarily in the home of another family member while getting a grant of up to $14,000 that will enable modification of a home and meet special needs specific to the service personnel. It also envisages a scholarship programme that will be an encouragement to college students to get qualified in matters of rehabilitation of the blind.

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