Washington, D.C. – Rhode Island families at risk of high mortgage payments or foreclosure got some much-needed help in Washington today as the Senate approved legislation strengthening federal homeowners’ insurance aimed at middle- and low-income homebuyers. With the security of Federal Housing Administration (FHA) insurance, lenders can give reasonable mortgage rates to homebuyers who otherwise might be pushed into the subprime market.
U.S. Senator Sheldon Whitehouse (D-R.I.) applauded the passage of the FHA Modernization Act of 2007 (S. 2338), which will help more working families afford to purchase or stay in their homes.
“For the millions of Americans working hard and saving to purchase a home, a risky sub-prime mortgage shouldn’t be their only option,” Whitehouse said. “Expanding federal loan insurance will help bring their dream of homeownership closer to reality and will give existing homeowners more flexibility to refinance.”
For months, declines in the housing market nationwide have led to a dramatic increase in foreclosures rates, particularly among low- and middle-income homeowners with subprime mortgage loans. A June 2007 report by the Government Accountability Office (GAO) found that as the market for subprime loans has grown, FHA’s market share has fallen, particularly among minority borrowers – meaning that fewer and fewer homeowners are benefiting from stable, secure federal homeowners insurance. In Rhode Island, the number of FHA-backed loans dropped from 3,085 in 2001 to just 481 in 2005 – an 85 percent decline.
S. 2338, which passed 93 to 1, will expand both minimum and maximum loan levels and simplify downpayment requirements to make Federal Housing Administration loan insurance available to more working families. The bill will also increase access to post-purchase homeownership counseling for low- and moderate-income homeowners having difficulty making their mortgage payments; remove caps on certain “reverse mortgages,” which allow seniors to convert the equity in their homes into cash; and create a pilot program aimed at broadening access to credit for borrowers without sufficient credit histories at traditional credit bureaus.
Whitehouse is a cosponsor of several other measures to address the mortgage crisis, including: the Mortgage Disclosure Act of 2007 (S. 2153), introduced by Senator Jack Reed (D-R.I.), which would strengthen mortgage disclosure standards for consumer mortgages to ensure subprime borrowers know their payments could increase substantially; the Home Ownership Preservation and Protection Act of 2007 (S. 2452), introduced by Senator Chris Dodd (D-Conn.), which would prohibit a number of unscrupulous lending practices and give homeowners in default of their mortgages new tools to stave off foreclosure; and the Helping Families Save Their Homes Act (S. 2136), introduced by Senate Majority Whip Dick Durbin (D-Ill.), which would give homeowners new leverage in staving off foreclosure and keeping their homes in the event of bankruptcy.
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