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House to vote soon on foreclosure legislation

CU supports proposals that may help stabilize the housing and financial markets

February 25, 2009

Dear Representative:

On Thursday, the House is expected to vote on H.R. 200, Helping Families Save Their Homes Act of 2009 and H.R. 703, Hope for Homeowners, proposals that may be a part of a broader package intended to help stabilize the housing and financial markets. Consumers Union, the non-profit publisher of Consumer Reports, strongly supports these measures.

Last week, the Obama Administration unveiled the Homeowner Affordability and Stability Plan, a comprehensive plan to help those facing foreclosures remain in their homes. This plan called for the judicial modification of home mortgages during bankruptcy. H.R. 200 will accomplish this objective and is consistent with the Administration’s goal of offering assistance to homeowners making a good-faith effort to stay current on their mortgage payments. The judicial mortgage proposal in the legislation is a last resort, no-cost option to foreclosure that may keep as many as 1.8 million people in their homes, according to Credit Suisse. Giving bankruptcy judges this power simply brings home mortgages under the same treatment that judges already have for every other loan. H.R. 200 will provide banks with a stronger incentive to work with borrowers to make mortgages more affordable.

The number of delinquent loans on track for modification remains staggeringly low. The Help for Homeowners Program was created as a tool to help homeowners avoid foreclosures and to stabilize the housing market. With only 357 applications made by the close of 2008 and only 25 consumers able to qualify for the program, the Hope for Homeowners Program has fallen far short of its goals. A more predictable and sustainable approach to loan modifications is needed. H.R. 703 goes a long way in addressing several of the structural, financial and legal obstacles that prevent home owners and loan servicers from successfully working together to avoid defaults. It, too, is consistent with the Administration’s plan to ease restrictions in FHA programs to ensure that more homeowners participate in the HOPE program.

We urge you to vote for these bills as they proceed to the floor. Both bills will help keep honest, hard working homeowners who may have been lured into bad loans or suffered economic hardships to stay in their homes and avoid foreclosure. Moreover, putting the brakes on foreclosures will provide a much needed boost to devastated neighborhoods and will ultimately help turn around the economy.

Sincerely,

Pamela Banks
Policy Counsel

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