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Sweeping Bills Passed To Help Homeowners in Maryland •
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Housing Accord Puts Builders First
By Lori Montgomery
The Washington Post
Thursday 03 April 2008
Strapped homeowners offered little aid.
Senate Democratic and Republican leaders rushing to address the nation's housing
crisis reached agreement yesterday on a package that would provide billions
of dollars in tax rebates to the slumping home-building industry while offering
little to homeowners threatened with foreclosure.
After working through Tuesday night to flesh out a bipartisan agreement, lawmakers
unveiled a bill that rejects the most ambitious plans for aiding distressed
homeowners, including a Democratic proposal to permit bankruptcy judges to modify
the mortgage on a person's primary residence.
Instead, lawmakers settled on a sharply scaled-back array of measures that
would provide $4 billion in grants for cities to buy foreclosed properties,
temporary tax breaks worth up to $7,000 for home buyers who purchase foreclosed
properties, and new tax deductions for almost every American who owns a home.
The package, which would cost about $15 billion over the next 10 years, also
would jump-start stalled legislation to streamline the Federal Housing Administration,
one of the top priorities of the Bush administration.
Families who cannot afford to repay their home loans - the group at the heart
of the mortgage meltdown - would benefit mainly from $100 million to expand
foreclosure counseling services and greater latitude for local housing authorities
to use tax-exempt bonds in refinancing subprime loans.
Home builders and other businesses suffering losses in the flagging economy,
meanwhile, would get the lion's share of federal spending in the bill: $6 billion
in tax rebates.
Senate Majority Leader Harry M. Reid (D-Nev.) lauded the agreement as "a
robust package" that is "good news for the American people."
But the lead negotiators on the deal, Senate Banking Committee Chairman Christopher
J. Dodd (D-Conn.) and the panel's ranking Republican, Sen. Richard C. Shelby
(Ala.), acknowledged that the legislation does not go as far as either side
would like and represents only their first attempt at helping to resolve the
nation's housing problems.
"This is not a complete product, obviously," Dodd told reporters.
"But it is a major step in the right direction."
Dodd called the package a "confidence-building measure" that sought
to identify "common ground" between the two parties, which had until
this week been gridlocked on the issue. At a joint news conference, Dodd and
Shelby said they would work together in the coming weeks to see if they could
reach agreement on broader measures, including a plan to permit the FHA to underwrite
$300 billion in new, low-cost mortgages for struggling homeowners.
Still, some economists, local politicians and advocates for borrowers reacted
with disappointment. They estimated that 8,000 families per day are sliding
into foreclosure and said that without a major new mechanism for renegotiating
mortgages, the package announced yesterday is unlikely to help most borrowers
struggling to keep their homes.
"It's not clear what good it's really doing," said Dean Baker, co-director
of the Center for Economic and Policy Research. "It's a bipartisan effort
not to help the right people."
"This is a case of Congress thinking they have to do something, rather
than actually doing something that will make a difference," said David
C. John, a senior research fellow at the Heritage Foundation.
Last night, Senate aides were still working out details of the package, which
is scheduled to be presented today on the chamber's floor. Both parties will
then be free to offer amendments, Dodd said. He added that Democrats will almost
certainly try to restore the bankruptcy provision, which was the centerpiece
of the housing bill they originally proposed in February.
That bill was strongly opposed by the White House and other Republicans, who
argued that permitting judges to modify mortgages would cause lenders to tighten
their standards and raise interest rates. At the time, many Republicans were
reluctant to pursue any intervention in the housing market, and Senate Republicans
last month blocked the initial Democratic bill.
Days after lawmakers left Washington for a two-week break, however, the Federal
Reserve Board stepped in to prevent the collapse of a major Wall Street investment
bank, Bear Stearns. That prompted Democrats to accuse the White House and other
Republicans of helping Wall Street while ignoring Main Street. When lawmakers
returned to the Capitol this week, Senate Republicans and Democrats agreed to
start talking.
The result was the bill unveiled yesterday, a mixture of Republican and Democratic
measures. While they lost the bankruptcy provision, Democrats were able to keep
another of their top priorities, $4 billion in Community Development Block Grants
to purchase foreclosed homes and help stabilize neighborhoods hit hard by declining
home prices.
Democrats also got extra money to help as many as 250,000 families get counseling
to avoid foreclosure, though their original plans for $200 million were cut
in half. Another $1.7 billion in federal funds would be used to finance $10
billion in tax-exempt bonds for local housing authorities.
The bill also strengthens truth-in-lending laws and lengthens the amount of
time a lender must wait before starting to foreclose on the homes of military
veterans.
FHA modernization was a top Republican priority. Under the proposal, the FHA
would increase its loan limit to $550,000 in the most expensive housing markets,
giving more families access to low-cost loans.
Republicans proposed the temporary tax credit for home buyers, which would
provide $3,500 a year for two years to buyers who purchase homes in foreclosure.
Democrat Max Baucus (Mont.), chairman of the Senate Finance Committee, offered
the new property tax deduction, which would save families who do not currently
itemize deductions as much as $1,000 on their federal taxes.
Both parties wanted to help home builders and other businesses. Under the agreement,
corporations that lose money in 2008 and 2009 would be permitted to apply their
losses to tax returns from as far back as 2004, making them eligible, according
to a bill summary, to "receive any applicable refunds."
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Sweeping Bills Passed To Help Homeowners
By Philip Rucker
The Washington Post
Thursday 03 April 2008
Maryland lawmakers passed some of the nation's most ambitious legislation to
control the housing crisis yesterday by toughening oversight of the mortgage-lending
industry and establishing preemptive measures to help people at risk of foreclosure.
Taken together, Maryland's bills are among the most sweeping in the country
as legislatures from California to Florida consider proposals to stem the escalating
rate of foreclosures.
Components of Gov. Martin O'Malley's legislation package cleared the Democratic-controlled
General Assembly yesterday, and other bills advancing in it were widely expected
to pass as soon as this morning. O'Malley (D) could sign some of the bills into
law this afternoon, and the emergency measures would take effect immediately.
The bills include making the most egregious mortgage schemes subject to criminal
prosecution, extending the foreclosure timetable from 15 to 150 days and prohibiting
prepayment penalties and transactions in which homeowners are tricked into signing
over their houses to third parties.
Lawmakers hailed the legislation as a signature accomplishment for O'Malley,
whose administration introduced the package after conducting a broad study of
the housing crisis last year.
"There are people who are suffering in silence and have the feeling they
are two or three months behind in [payments] and don't know who to turn to,"
said Sen. Ulysses Currie (D), whose Prince George's County district is among
the hardest hit with foreclosures. "The bills will give these people a
sense of hope and direction."
O'Malley is expected to announce soon that he will lead a statewide campaign
to inform homeowners facing foreclosure about how they can seek help and about
new state programs available, said Thomas E. Perez, secretary of labor, licensing
and regulation. The governor will appear in ads on TV, on radio, in newspapers
and on the sides of buses, Perez said.
The campaign will reach out to people falling behind in payments with direct-mail
postcards and visits from state officials, guiding them to state agencies and
nonprofit organizations for help.
"We will be using every creative available outreach tool to ensure that
Marylanders in distress are aware of their rights and aware of their options,"
Perez said. "Passing laws is of minimal benefit if people aren't aware
of the new rights that they have."
O'Malley also is scheduled to testify before Congress next week about his administration's
approach to the housing crisis, said Rick Abbruzzese, a spokesman for the governor.
Maryland's legislation would provide "immediate relief" to homeowners
facing foreclosure, Perez said.
"There's a lot of talk at the federal level, but there's seldom any action,
so that's why the governor has taken the bull by the horns at the state level,"
Perez said.
Perez said the legislation overhauls lending practices and seeks to prevent
the kinds of predatory loans that contributed to the mortgage crisis.
Steven A. Silverman, chief of consumer protection under Attorney General Douglas
F. Gansler (D), said the legislation protects homeowners against "foreclosure
scams and shady lending practices."
The mortgage-lending industry largely supported the administration's proposals.
Kathleen Murphy, president and chief executive of the Maryland Bankers Association,
attributed the consensus to O'Malley's Maryland Homeownership Preservation Task
Force. The group included lawmakers, community advocates and industry leaders
who reviewed mortgage laws and came up with ideas for change.
"All of that time deliberating the issues, I believe, has resulted in
what is a very good package that will provide meaningful reform for borrowers
but also continue to have an environment in the state that legitimate lenders
will want to lend in," Murphy said.
Phillip Robinson, executive director of the nonprofit group Civil Justice,
which provides assistance to homeowners facing foreclosure, said the legislation,
in particular the extension of the foreclosure timetable, will make "a
huge difference."
"Those homeowners that have a legitimate defense will have much more of
an opportunity to present that defense than they do under the current process,"
Robinson said.
The extension affects those who face foreclosure starting after the bill is
signed but does not change foreclosures underway.
Lawmakers also are weighing a proposal to require people seeking subprime mortgages
to meet with independent credit counselors before signing on to risky loans.
The number of people losing their housing in Maryland has risen at a startling
pace. In February, more than 4,000 foreclosure actions were taken in Maryland,
a ninefold increase from February 2007, according to RealtyTrac, which maintains
foreclosure data.
O'Malley's bills have received overwhelming support in the legislature, although
some lawmakers from suffering communities questioned whether the measures will
do enough to help people who have lost their homes or are behind in their payments.
"They need a federal bailout from Congress," Del. Dereck E. Davis
(D-Prince George's) said.
Sen. Thomas M. Middleton (D-Charles) said the state government "just doesn't
have the financial wherewithal to really help people out."
Del. Veronica L. Turner (D-Prince George's), who represents hard-hit Fort Washington,
said her constituents are thankful for any help they can get. "My constituents
are calling me. They need help," she said. "A lot of people have already
lost their homes before the help came."
Across the country, hundreds of bills are pending in legislatures to address
the mortgage-lending industry, said Heather Morton, an analyst at the National
Conference of State Legislatures.
But Maryland is at the forefront in developing a comprehensive package of laws
to stem the tide of foreclosures, said Uriah King, a policy analyst at the Center
for Responsible Lending. "I think Maryland, in particular, has taken a
really strong step forward in addressing the underlying causes of the foreclosure
crisis, particularly the reckless underwriting," King said.
Perez said he is receiving calls from his counterparts in other states asking
"what we did and how we did it."
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