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“Memo to Congress: We Oppose HR 3609 – CUT IT OUT!”
By Sherman Ragland | January 21, 2008
WASHINGTON, D.C. – Just when you thought the housing market couldn’t get any worse, think again. All home buyers will be required to put more money down, pay higher closing costs, and worse – have to add on an additional 2% to their loan rates.
These new requirements will happen overnight if a new bankruptcy bill passes, says the Mortgage Bankers Association. The proposed legislation will make it considerably more difficult for many Americans to afford a new home and inevitably keep more potential buyers away from the market.
“If this proposal becomes law, it will amount to a new tax on homeowners, costing them hundreds of dollars more per month and totaling thousands of dollars more per year,” said MBA Chairman-Elect David Kittle in a statement.
HR 3609, the Emergency Home Ownership and Mortgage Equity Protection Act of 2007, was passed by the House Judiciary Committee on December 12th, 2007. The bill is now pending vote before the full House.
The legislation would allow bankruptcy judges to alter mortgage terms on the loans of primary residences, ending a 110-year old federal protection that prevented judges from having this power.
If courts are able to write down the value of mortgages in the event of a bankruptcy, lenders will face new financial risks because the value of the home – which is in fact the collateral for the loan – will be in question. The MBA says that, ultimately, all home loan borrowers will pay the price as lenders will be forced to offset their risk by requiring borrowers to put more money down, pay higher closing costs, and pay higher interest rates of 1.5% to 2%.
“Congress is, quite laudably, attempting to help consumers who face difficulties paying their mortgages,” Kittle said. “But this law will, ironically, create future difficulties by increasing mortgage costs. The last thing homeowners need in this market is higher mortgage payments.”
On average, a 2% rate hike would increase monthly payments by $336 for a borrower wanting to take out a home loan for $250,000. If that’s unaffordable, that borrower is faced with buying a home that costs about $50,000 less – so that 2% rate hike would decrease a borrower’s buying power by a whopping 20%. Refer to the chart below to see how your state will likely be affected.
Like many originators, Frank A. Thrift of Mortgage Solutions of Georgia echoes the MBA’s sentiments.
“In an effort to aid a small percentage of homeowners, it seems that congress again wants to punish the average homeowner to pay for the gross handling of the sub prime meltdown and now the bankruptcy situation,” said Thrift. “If a lender has questionable collateral with respect to bankruptcy, then of course there would be a pass through cost in interest rates, closing costs, etc.”
“This is a horse before the cart situation, meaning that unfortunately many borrowers should not have qualified for homes in the first place. Tightening guidelines and requiring more money down as well as education on homeownership and overall financial stability would certainly reduce the foreclosure and bankruptcy filings. Increasing mortgage payments via interest rates will only lead to more foreclosures and/or bankruptcies.”
To help stop this legislation, contact your state representative at https://forms.house.gov/wyr/welcome.shtml and tell them you oppose HR 3609
NOTE: Please Cut and Paste The Following Into the Comments Box: We Oppose HR 3609, because it will further lower home values, curtail the revenue to local municipalities from property taxes, and will make home loans less available to home owners. Please vote against HR 3609.
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Topics: Uncategorized | 1 Comment »
Tags: bankruptcy judges, equity protection act, home loan, house judiciary committee, housing market, loan borrowers, mortgage bankers association, mortgage costs, mortgage terms, new bankruptcy bill
One Response to ““Memo to Congress: We Oppose HR 3609 – CUT IT OUT!””
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February 13th, 2008 at 10:04 pm
Here’s an easy way to do something about HR 3609.
You can vote on this legislation, and have your vote sent direct to your representative. Help get the word out.
http://www.govit.com/H_R_3609/To_amend_title_11_of_the_United_States_Code_with_respect_to/
http://www.govit.com/S_2136/A_bill_to_address_the_treatment_of_primary_mortgages_in_b