In the wake of high home foreclosures, instability in the financial markets and the historic government bail out of former investment giant, Bear Stearns, Congress is taking action to provide relief to homeowners potentially facing foreclosures.

I sit on the House Financial Services Committee, which has been working since early 2007 to stem the significant rise in mortgage foreclosures, including HR 1852, a bill that would in part increase the loan limits FHA could make. While this and many other measures (including GSE reform, Subprime mortgage reform and HOPE VI) passed by the House are awaiting action in the U.S. Senate, I am relieved to see the Senate finally moving past their differences to address these vital issues affecting millions of Americans.

There will always be fluctuations in a free market economy, but we need to prevent the most dramatic swings. The fact is we have to limit some of the gains in order to limit some of the pain. In taking action, Congress must be careful in regulating the markets but regulators must enforce the law and act in a responsible manner on behalf of the millions of Americans harmed by risky lending practices.

House Financial Services Committee Chairman, Barney Frank, recently announced new draft legislation to allow the Federal Housing Administration (FHA) to insure and guarantee refinanced mortgages that have been significantly written down by mortgage holders and lenders. This new FHA proposal provides up to $300 billion in new guarantees to help refinance at-risk borrowers into viable mortgages. In exchange for the acceptance of a substantial write-down of principal, FHA will guarantee the loan if the lender will restructures the loan amount in terms the borrower can reasonably expect to pay. This could potentially refinance between one and two million loans.

We will have a hearing on this proposal next week in the House.

This entry was posted on Thursday, April 3rd, 2008 at 1:53 pm and is filed under Uncategorized .