Spratt Backs Plan To Address Housing Crisis
Monday, May 12, 2008 – For Immediate Release
Contact: Chuck Fant, 202-226-2651
One in 42 S.C. Homeowners Could Lose Home to Foreclosure
WASHINGTON – U.S. Rep. John Spratt (D-SC) responded to the housing finance crisis by voting for legislation to assist Americans in danger of losing their homes. The American Housing Rescue and Foreclosure Prevention Act of 2008, and the Neighborhood Stabilization Act of 2008, were approved last week by the House with bipartisan support.
“Owning a home is the American Dream, but thousands of South Carolinians are on the brink of losing their homes,” said Spratt. “We have a plan that will help many of those who are struggling.”
The housing finance crisis is worst in states like Florida and Arizona, but it has had a significant impact in South Carolina. According to the Pew Charitable Trusts, one in 42 homeowners in the state is projected to lose their homes to foreclosure over the next two years. Homeowners who do not lose their homes have also been hurt by the crisis. Pew estimates that 14% of all South Carolina homeowners will feel the ripple effects of the housing crisis, and that the crisis could also cost the state and local tax base $477 million.
The American Housing Rescue and Foreclosure Prevention Act of 2008 will provide mortgage refinancing assistance, which will help keep families from losing their homes and protect neighborhood values. The plan expands programs run by the Federal Housing Administration (FHA) that will allow borrowers in danger of losing their home to refinance into lower-cost government -insured mortgages they can afford to repay.
In order to qualify for refinancing and a new government-guaranteed mortgage, mortgage lenders will be required to take a loss. The amount of mortgage debt will have to be reduced so that the loan-to-value ratio is at least 85%. A government agency will buy the mortgage at this price, and obtain a guarantee from the Federal Housing Administration. Principal and interest payments on the loan will be re-determined based on the revised and reduced loan balance and on the government guarantee. If the house is sold within the next five years, the government will be entitled to a share of any profit, and a finance fee will be recouped whenever the house is sold. The plan is open only to owner-occupied homes. Speculators, investors, and vacation/second-home owners are not eligible.
The House also passed the Neighborhood Stabilization Act of 2008, which provides $15 billion in loans and grants to states to acquire vacant, foreclosed homes. The legislation will allow local communities to rehabilitate foreclosed properties, which currently drive down surrounding home properties, and place these homes back on the market.
“The housing crisis is hurting a lot of people,” said Spratt. “These bills will help many of these families, and also help get our economy back on track.”
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