As U.S. Housing Secretary Speaks In Cleveland, Brown Urges Administration To Support Senate Foreclosure Bill

Washington, DC – February 22, 2008 – As Alphonso Jackson, Secretary of the U.S. Department of Housing and Urban Development spoke today at the Cleveland City Club, U.S. Senator Sherrod Brown (D-OH) urged the Administration to do more to respond to the housing foreclosure crisis, beginning with support for The Foreclosure Prevention Act of 2008. The legislation, which is expected to be debated in the Senate next week, would keep many families in their homes, help communities harmed by the crisis, and prevent foreclosures in the future.

“I appreciate Secretary Jackson’s coming to Cleveland to share his views and listen to some of ours,” Brown said. “But the administration needs to walk the walk. Instead, the president’s budget calls for dramatic reductions in federal support for housing counseling, for assisted housing in urban and rural areas, for housing for the elderly and disabled, and for community development to help rebuild neighborhoods devastated by foreclosures.”

The president’s budget would eliminate the Rural Housing and Economic Development Program and Hope VI program, which tears down dilapidated housing and replaces it with mixed-income housing. It would also cut housing counseling from the $180 million appropriated by Congress last year to only $65 million, a 63 percent drop. Assistance for elderly and disabled housing would be reduced by 27 and 32 percent respectively. The Community Development Block Grant Program (CDBG), which could play a key role in revitalizing communities hard hit by the foreclosure crisis, is slated for a 22 percent cut. In 2004, Ohio received more than $191 million and in 2008 only $158 million. Under the president’s budget proposal including formula changes, in 2009 Ohio would only receive $120 million, a 38 percent cut from 2004.

“I also appreciate the efforts of Secretary Jackson and Treasury Secretary Paulson to marshal voluntary efforts by the private sector. But we need to look carefully behind the numbers. A homeowner who is offered a rate reduction from 11 percent to 10 percent may be counted as a loan modification but is not seeing much relief at all once penalties and fees are added in,” Brown said.

The Foreclosure Prevention Act of 2008 specifically would:

Increase pre-foreclosure counseling funds to $200 million. This additional funding would assist as many as 500,000 additional families to connect with their mortgage servicer or lender to explore options that will keep them in their homes.

Allow Housing Finance Agencies to Issue Bonds for Refinancings by increasing the current cap by $10 billion. This would allow housing finance agencies to use proceeds from mortgage revenue bonds to refinance subprime loans, provide mortgages for first-time home buyers, and for multifamily rental housing.

Change Bankruptcy Code to Allow Judges to Modify Mortgage of Debtor. This could help more than 600,000 financially-troubled families keep their homes by allowing them to modify their mortgages in bankruptcy. It would eliminate a provision of bankruptcy law that prohibits modifications to mortgage loans on the debtor’s principal residence for homeowners who meet strict income and expense criteria.

$4 Billion in CDBG Money for Purchase and Rehab of Foreclosed Properties. Unoccupied homes that have been foreclosed upon sap neighboring homes of their value and strain municipal resources. The legislation would provide additional CDBG funds to local governments to purchase these properties, rehabilitate them if necessary, and rent or re-sell them.

Simplified Disclosure on Mortgage Documents. This would amend the Truth-in-Lending Act and improve the loan disclosures given to homebuyers not only when they apply for a home purchase loan, but also when they refinance their home. The measure would require firm disclosure of the terms of the mortgage loan within 3 days of the maximum loan payment being disclosed, not only at application, but also seven days before closing. Finally, the bill would clarify that lenders are subject to statutory damages for violations of Truth-in-Lending disclosure provisions and increase the damages for mortgage violations from $2,000 to $5,000 per violation.