By Gerri Elder
For many homeowners who are behind on their mortgage loan payments and may be facing foreclosure, help is on the way. However, lawmakers feel that the help may come too late for some people who could be helped.
A new housing bill that has just been signed into law should help approximately 400,000 distressed homeowners who may be at risk for foreclosure.
These homeowners will be able to refinance out of their risky, high-cost mortgage loans into more affordable ones that will be backed by the federal government.
The problem is that the new law will not take effect until October 1. In the meantime, homeowners who may be eligible for help under the new law are continuing to lose their homes in foreclosures.
According to a recent Reuters news report, four members of a congressional housing market oversight panel have publicly urged the mortgage industry to temporarily back off of foreclosures in order to give the new law a chance to help.
The four Democrats who are members of the House of Representatives Financial Services Committee plan to hold a public hearing on September 17 to determine if mortgage lenders have complied with their request to delay foreclosure actions.
Committee Chairman Barney Frank of Massachusetts, committee member Maxine Waters of California, and committee members Mel Watt and Brad Miller of North Carolina are the legislators that have called for the mortgage industry to hold off on foreclosures for now. These lawmakers signed a letter that was sent to the chief executives of major financial institutions and financial industry lobbying groups.
Mortgage lenders HSBC Finance, JPMorgan Chase & Co, Fannie Mae, Freddie Mac and Wells Fargo & Co. were among those that were sent letters requesting that foreclosure actions be postponed. The lawmakers asked that the financial institutions review loan documents and prepare to refinance eligible homeowners, rather than starting the foreclosure process.
The committee also requested information on mortgage servicing practices from the lenders.
The letter composed by the House of Representatives Financial Services Committee on August 5 was not the first time mortgage lenders have been asked to stall foreclosures. On July 25, Frank had asked mortgage lenders to hold off on foreclosure actions until the new government-backed mortgage refinancing program began.
While the House of Representatives Financial Services Committee was working on sending their letter to mortgage lenders and lobbyists, New York Governor David Patterson was also working to help distressed homeowners.
Newsday reported that on August 5, Patterson signed legislation that will give homeowners in New York an extra 90 days to attempt to save their homes from foreclosure. The law is targeted to help homeowners who have subprime mortgage loans, but also strengthens mortgage lending rules.
In New York, the mortgage foreclosure process usually takes 440 days. Although this is the longest foreclosure process in the country, the new law will add an extra 90 days in order to help homeowners.
The extra time will allow homeowners time to meet with the mortgage companies and get other information on handling their debt.
The United States is in the midst of the biggest housing market slump since the Great Depression, and bankruptcy rates are soaring.
Lawmakers recognize that assistance is necessary, not only to help homeowners avoid foreclosure, but to prop up some of the largest mortgage lenders in the country as well.
The federal legislation enacted last month includes emergency financing for mortgage giants Fannie Mae and Freddie Mac. These lenders were deemed too large to fail, and as a result, will receive financing if and when it becomes necessary in order for them to stay afloat.