New legislation put forth by Sen. Jack Reed, D-R.I., would require servicers to offer loan modifications to ‘qualified homeowners’ if the net present value of modifying a loan is greater than that of foreclosing. The bill, the Preserving Homes and Communities Act of 2009, would additionally establish a new mortgage payment assistance program and incentivize states and local governments to create foreclosure mediation programs.
Sens. Dick Durbin, D-Ill.; Sheldon Whitehouse, D-R.I.; and Jeff Merkley, D-Ore,Â have signed on as cosponsors.
"Voluntary efforts to keep families in their homes have failed," says Durbin, who earlier this year failed in his push to legislate court-ordered loan modifications.
Reed's bill would improve the current loan modification program by protecting homeowners against all foreclosure proceedings – not just against a foreclosure sale – while they wait for a loan modification analysis, according to a media statement.
The legislation would also establish "meaningful penalties" by making noncompliance a defense to foreclosure. Foreclosure fees would be limited, and costly mark-ups prohibited.
The mortgage payment assistance program would be designed to assist homeowners who are experiencing a sharp reduction in income through no fault of their own, Reed's statement says. His bill would authorize $6.375 billion in formula funding to states to create revolving loan funds to offer homeowners grants or subsidized loans.
The bill would further authorize $80 million in competitive federal matching funds for states and localities to establish mandatory mediation programs. The bill also proposes allocating $5 million to the development of a national foreclosure database.
SOURCE: Office of Sen. Jack Reed