If recent federal legislation is anything to go by, then our politicians are finally responding to the public’s increasing anxiety over the recent explosion of “For Sale” signs popping up in front of homes. This anxiety has only been aggravated by estimations from the Joint Economic Committee, which is responsible for reporting the current economic condition of the United States to Congress, that 2007 to 2009 could see a minimum of two million home foreclosures. Congresswoman Lois Capps, of Santa Barbara, gave her vote this month to the Neighborhood Stabilization Act, H.R. 5818, which provides $15 billion in loans and grants to states for the purchase and rehabilitation of foreclosed homes.
Capps’s impetus for supporting the bill was her concern over the negative impact that foreclosed homes have on the surrounding communities: lowered home values, increased crime, and safety hazards. “Passage of this legislation comes at a critical time for America,” said Capps in a press release concerning the act, “and especially for folks on the Central and South Coasts of California. While I am very disappointed that the President has irresponsibly threatened to veto these bills, I hope that we can find a compromise that helps homeowners across the country.” Introduced in April of this year, the bill was passed in the House in May and still awaits a Senate vote.
The expectation of a presidential veto is not surprising because the act has proven to be far from bipartisan, with 99% Democratic support in the House and 95% Republican opposition. Shelley Capito, Republican representative for West Virginia, summed up the Republican opposition in a speech made to the House by calling the bill “an unnecessary government intervention in the housing market which will bail out real estate speculators, servicers, and lenders while doing nothing to assist hardworking Americans struggling to make their mortgage payments. This bill will not keep one person in their mortgage or in their home.”
Capps responded by pointing out the bill’s various safeguards against corruption. The bill includes a protection against overpayment for foreclosed and abandoned properties by requiring that only loans, and not grants, can be used for purchase. Loans must be paid back to the federal government. Also, the purchase price of foreclosed properties by the state cannot exceed 110 percent of the local average, and governments and nonprofits will not be allowed to bid on properties for sixty days after foreclosure.
Capps also voted in favor of the Foreclosure Prevention Act, H.R. 3221, which includes reforms of the Federal Housing Administration (FHA) and mortgage barons Fannie Mae and Freddie Mac, which were originally government programs and still remain closely affiliated. In an effort to stem foreclosures, the bill would create a mortgage refinancing program: The FHA could work with lenders to refinance mortgages for homeowners struggling to avoid foreclosure, with lower-cost, government-insured mortgages they can afford to pay. Making permanent the loan increase provided in the 2008 Economic Stimulus Act the bill authorizes the FHA to increase its loan limit to $729,750. “I have heard first-hand from my constituents how critical this is for our high cost housing markets in Santa Barbara, Ventura, and San Luis Obispo counties,” said Capps, “and I worked diligently with my colleagues to make sure this provision was included.” The bill also includes a $7,500 first-time homebuyer tax credit, with the aim of making the jump into the housing market more affordable. There would furthermore be a provision of $100 million for community groups to offer foreclosure counseling. “We have to act now,” said Capps, “to help homeowners save their homes, help communities recover from these foreclosures, and ensure that the loopholes that allowed this mess to happen in the first place are forever closed.”
The Foreclosure Prevention Act passed in both the House and the Senate and now awaits approval from the president. The senate vote for the Foreclosure Prevention Act was much less divided along party lines, with 96% Democrat support and 71% Republican. All Democratic votes cast were in favor, the support percentage brought down only by those who did not vote on the measure. (Senators who did not vote include all three of the leading presidential hopefuls.)