As of today, April 3, the Senate has yet to pass the Foreclosure Prevention Act (we certainly would have been told).
So why is a piece of legislation that is said only to be ‘pending’ or ‘in discussion’ at this point generating so much attention yet again? Has anything at all changed from the last time MortgageOrb analyzed the bill, back in late February?
A side-by-side content comparison of the bill's current version and the one that stumbled a couple of months ago might not reveal any significant shifts. But it is the attitudes on Capitol Hill toward addressing the foreclosure crisis that, between late February and now, have undergone a notable transformation.
Or, at the very least, we now have an illusion of transformation for either photo-op purposes, highlight-just-how-serious-this-foreclosure-problem-is purposes, or – most likely – both.
An April 2 New York Times article by David M. Herszenhorn and Vikas Bajaj featured photographic evidence – in the form of an April 1 snapshot showing three Republicans and three Democrats announcing agreement to work on addressing the foreclosure crisis – that Americans forced out of their homes, capital markets turmoil and nationwide financial distress are truly worthy of bipartisan concern and some form of an ostensibly collaborative response. Now how often do we see that?
As the article notes, ‘Senate Democrats and Republicans announced their plans at a joint news conference, an exercise so rare, given the partisan acrimony that has dominated Capitol Hill in recent months, that the majority leader, Senator Harry Reid of Nevada, felt compelled to offer a disclaimer: 'This is not April Fool's,' he said. 'This is serious business.'’
Continuing the cooperative spirit, Reid and Senate Republican Leader Mitch McConnell issued a joint statement that highlighted how in contrast to February – one collapsed major bank and one Fed-engineered rescue effort later – government intervention has become a notably more acceptable concept among policymakers, at least in the financial and mortgage domains.
‘Senior Senate Democrats and Republicans have reached an agreement in principle to strengthen the economy by addressing the nationwide foreclosure crisis. Getting to this point has required compromise by all sides,’ the senators pointed out.
‘This is a solid, bipartisan start to keeping families facing foreclosure in their homes, helping other families avoid foreclosures in the future, and helping communities already harmed by foreclosure to recover,’ the statement continues.
Of course, even in advance of the bill's ultimate passage – which, according to many, seems fairly likely – not everyone has completely fallen under the spell of the Senate's sudden show of (relative) peace, love and understanding.
For instance, certain measures outlined in the legislation have been criticized for promoting allegedly excessive – and potentially harmful – intervention in processes that might better be left alone. A particular sticking point for many in the mortgage industry continues to be a proposed provision for bankruptcy reform allowing judges to modify mortgage contracts.
‘A more modern and effective FHA, mortgage revenue bonds for state housing finance agencies, additional money for counseling – these are all things that will be of great help to struggling homeowners,’ states Kieran Quinn, chairman of the Mortgage Bankers Association.
However, he adds, ‘I hope that senators will keep their eye on that goal, and not attempt to attach to the bill partisan provisions such as bankruptcy cramdown that would increase borrowing costs on all future borrowers and delay progress on this important bill.’
In addition, one component of the bill that has been spotlighted less often than anything linked to helping homeowners is a measure targeted at homebuilders, who, as a group, tend to garner less sympathy in this crisis.
Under the terms of the Foreclosure Prevention Act, ‘The carry-back provision would allow homebuilders to apply losses from 2006 and 2007 as far back as five years against taxes paid on profits – a three-year extension of the current carry-back allowance – even though much of the builders' profit came from their own subprime lending and speculative overheating of the market,’ says the Laborers' International Union of North America (LiUNA) in its statement criticizing the bill.
‘Corporate homebuilders profited from the creation of this crisis,’ adds Terence M. O'Sullivan, general president of LiUNA. ‘They should not be further rewarded with a multi-billion dollar bailout.’
There's that nefarious word again: bailout. Despite the newfound bipartisan agreement that perhaps ‘necessary rescue’ now better captures the essence of the legislation, no one expected the Senate's photo-op and press conference to put us all on the same page.
– Jessica Lillian, Commercial Mortgage Insight
