Sen. Voinovich Introducing Second Bill To Ease Foreclosure Crisis


WASHINGTON, D.C., November 8, 2007 — U.S. Senator George V. Voinovich (R-OH), who last spring introduced the Mortgage Relief Act to help those suffering from foreclosure, today is introducing the Expanding American Homeownership Act of 2007 – legislation which will allow Americans facing foreclosure or resetting interest rates to refinance without the usual burdens associated with a Federal Housing Administration (FHA) loan. The bill will also increase homeownership opportunities for millions of American first-time home buyers. The House version of this bill passed overwhelmingly last year by a vote a 415-7.

“Government should do everything it can to not only help ease the current foreclosure crisis but also break down the barriers that separate Americans from the dream of homeownership,” Sen. Voinovich said. “We must work to help Americans in immediate need while fighting to create an ownership society.”

The Expanding American Homeownership (EAH) Act will enable FHA to help those facing foreclosure to refinance for lower rates while helping millions of more low- and moderate-income families to buy a first home. Many of these borrowers currently must pay subprime rates because FHA lacks the ability to offer an affordable financing option. The companion bill in the House was written by Rep. July Biggert (R-IL) and has nearly 20 cosponsors including Ohio Reps. Steve LaTourette and Deborah Pryce. The late Rep. Paul Gillmor of Ohio was also a cosponsor.

FHA was created in 1934 to give homebuyers access to reasonably priced mortgages under fair terms. Since then, it has been able to help more than 34 million families become homeowners. This legislation will modernize FHA and offer Americans a variety of safe homeownership options at a fair price.

The Expanding American Homeownership Act will:

1) Eliminate the current statutory 3 percent minimum down payment, reducing a significant barrier to homeownership. FHA’s existing down payment requirement does not meet the demands of today’s marketplace, where most first-time homebuyers put down 3 percent or less. The “new” FHA will offer a variety of down payment options.

2) Create a new, risk-based insurance premium structure for FHA that would match the premium amount with the credit profile of the borrower. It would replace the current structure, in which there is standard premium amount for all borrowers, while still protecting the soundness of its Insurance Fund. FHA would have the flexibility to charge a lower premium for low-risk borrowers, and to charge higher-risk borrowers a slightly higher premium.

3) Increase and simplify FHA’s loan limits. FHA’s loan limit in high-cost areas would rise from 87 to 100 percent of the GSE conforming loan limit and in lower-cost areas from 48 to 65 percent of the conforming loan limit. This change is crucial in today’s housing market. In many areas of the country, the existing FHA limits are lower than the cost of new construction, eliminating FHA financing as an option for buyers of new homes in those markets. FHA has simply been priced out of the market in other areas, such as California, where FHA insured only about 5,000 home mortgages in all of 2005, down 95 percent from 109,000 in 2000.

The E.A.H. Act is the second component in Sen. Voinovich’s legislative strategy to assist struggling homeowners in avoiding foreclosure. The first component addresses the tax consequences of debt forgiveness.

Declining home prices and rising foreclosure rates have forced more and more families – often minorities, the elderly and immigrants – to sell their homes for less than they paid for them, and sometimes for less than the outstanding debt. Others have worked out a deal with their lenders where part of their mortgage debt has been forgiven. The Internal Revenue Service currently taxes any loan forgiveness as “income.”

That’s why Sen. Voinovich introduced the Mortgage Relief Act of 2007 in May – legislation which will relieve families of a tax burden when their lender forgives part of the mortgage on a principal residence. The Mortgage Relief Act passed the House in October 386-27 but has yet to be voted on in the Senate.

“Clearly it is unfair to tax people on income that doesn’t exist,” Sen. Voinovich said. “This is particularly true at a time when they have experienced a substantial economic loss on the most significant asset they own and have no way to pay the tax. This tax is unfair and must end immediately.”


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