Senate Finally Expands Government Foreclosures Initiative

by on Foreclosures

The Senate may have partly redeemed itself from its rejection of the bankruptcy reform measure recently by approving on Wednesday a measure that would enhance the government foreclosures program.

The bill, voted 91 to 5, would protect mortgage servicing firms from litigation if they modify loans under government foreclosures schemes and would require lenders to notify tenants of foreclosure homes at least 3 months before eviction.

The measure would also expand efforts to mitigate homelessness, which has soared as families were forced out of homes they have lost to private lender and government foreclosures. It allotted $2.2 billion to directly help homeless people and another $440 million to finance homelessness prevention projects.

As now known by many Americans, the provision of this bill that would have empowered judges to modify loans of homeowners in bankruptcy was rejected by the Senate, so this measure would be stricken out from the broader bill.

As of date, most government foreclosures programs have not progressed as expected, especially the Hope for Homeowners initiative which was launched under the Bush administration in 2008. President Obama’s government foreclosures program, dubbed Making Homes Affordable, has been slowed down by the failure of lenders to modify more loans due to various reasons.

Also included in the new bill are measures to help the Federal Deposit Insurance Corp. FDIC would be able to increase its borrowing authority from $30 billion to $100 billion. With the additional funding authority, FDIC would be able to help banks with reduced deposit insurance premiums. The bill would also extend FDIC’s $250,000 maximum deposit insurance to the year 2013.

While the new bill allocated an additional $2.3 billion drawn from the $700 billion TARP fund for various allocations, it did not allot any additional money to help homeowners in danger of private lender or government foreclosures.

Democratic Senator Christopher Dodd, head of the Committee on Banking, explained that most of the provisions in the bill are aimed at supporting government foreclosures initiatives.

Another Democratic Senator, Jack Reed, who worked for the homelessness provisions of the bill, said he campaigned for the provisions to help homeless people because the flood of private lender and government foreclosures has pushed up homelessness rates to a point where there are already stories of tent cities emerging.