Foreclosure Mitigation Plans Gaining Prominence

May 1st, 2008

As foreclosures gallop across the country more foreclosure mitigation plans are in the offing and gaining prominence. On Wednesday 23rd a House panel agreed to the sanctioning of $15 billion as loans and grants for the local governments for purchase of foreclosed houses. The House Financial Services Committee voted 38 for and 26 against this bill. It is a part of a more general package of legal measures related to housing that the Democrats are trying to push through in an answer to Housing problems lashing the country. Earlier the panel decided for legal protection in certain cases of mortgage services when they work with foreclosed borrowers. Till now many servicers said that they only collected the mortgage on behalf of the original owners and had no right to negotiate on their own; if they did so there was the possibility that lenders would sue them. It was against this background that the vote was pushed through.

Many of the Republicans in the panel opposed the move saying that the use of federal funds to purchase foreclosed houses would defeat the very purpose it aims at by encouraging more of the same. It is like giving incentives to foreclosures opined Rep. Spencer Bachus.

The chairperson of the committee Barney Frank (D.Mass) reiterated that there were other provisions in the bill. The house must be at least 60 days through the foreclosure steps. This would check misuse. He stressed that the most important thing is that the local governments trying to battle foreclosures must be given more support. Cities are badly bruised and this is the only way help can be extended to the metros and counties.

There would be equal division of the $15 billion into loans and grants. It would be disbursed according to the localized intensity of foreclosures calculated in percentage. Also would be taken into consideration the average housing price amongst other sundry factors The money would be given to government run and non-profit bodies. It would be spent for buying, repairing and reselling or renting out foreclosed properties. Approximately half of the grant money amounting to $3.75 billion would go to help low-income borrowers victimized by foreclosures. This group comprises 50% of the sufferers.

Republicans are critical about these measures saying that it would encourage more foreclosures and add to federal deficits. The ultimate beneficiaries of the bill seem to be the lenders.