CONGRESSMAN LATHAM CO-SPONSORS BILL TO EASE HOUSING CRISIS
March 06, 2009 – (RealEstateRama) — Iowa Congressman Tom Latham announced on Thursday his support of a housing initiative that will help ease the current turmoil in the market while encouraging the flow of credit and economic recovery.
“The housing crisis has shaken the confidence of millions of Americans who aspire to home ownership, which is one of the cornerstones of the American dream,” Congressman Latham said. “We need common-sense solutions to calm the market and bring certainty and stability back into the equation for America’s homeowners.”
The bill, co-sponsored by Congressman Latham, grants the U.S. Department of Housing and Urban Development more flexibility to insure refinanced mortgages to help responsible Americans stay in their homes. It also includes strict accountability to make sure those with genuine needs receive the benefits by requiring borrowers to verify that they reported their income accurately on the original loan application and haven’t engaged in financial fraud.
Congressman Latham is pushing for the bill as an alternative to a measure approved in the House on Thursday that contains provisions that will freeze credit and prolong the housing crisis.
Among the most harmful provisions in the bill considered on Thursday is one that grants bankruptcy court judges wide authority to modify the terms of home mortgages for those in danger of defaulting on their loans. The bill would rewrite federal bankruptcy laws to allow judges to reduce the principal of a home loan, a practice known as a “cram-down.”
Congressman Latham said allowing judges simply to erase debt would introduce more uncertainty into the housing market and have sweeping unintended consequences that could fuel an even more intense housing meltdown.
“Lenders will become more reluctant to offer credit to potential homebuyers because they’ll have less reason to believe they’ll get a return on their investment. In turn, that’ll drive up interest rates and derail recent efforts to unfreeze credit markets,” Congressman Latham said. “We need a policy that offers real help to homeowners, but this bill is only going to make home ownership a more difficult goal to attain.”
The bill approved by the House on Thursday also lacks a provision to guard against taxpayer support going to borrowers who intentionally misrepresented their income or assets on the original loan application.
The bill backed by Congressman Latham leaves out the cram-down provision and requires homeowners to prove they’re in genuine need of mortgage assistance before they can receive help.
“I look forward to working with my Republican and Democratic colleagues in Congress to put our country back on the path to prosperity,” Congressman Latham said. “But we have to make sure the unintended consequences of our actions don’t take us in the wrong direction.”
