House, Bush eye mortgage reforms

Missouri Foreclosure & Real Estate News
Pamela Brogan
pbrogan@Gannett.com


Washington — Missouri lawmakers and the Bush administration are moving on several fronts to help homeowners who can't afford higher interest payments on subprime mortgages avert foreclosure.

Their efforts come as the number of foreclosures in Greene County has increased 425 percent since 1997, rising to 667 from 157, according to the Urban Neighborhoods Alliance, a nonprofit group that educates people about credit issues.

In Greene, Christian, Dallas, Polk and Webster counties, there were 155 foreclosures in October, compared with 106 for the same month a year ago, a 46 percent increase, according to RealtyTrac, an online real estate marketing firm.

To help ease the crisis in Missouri and across the nation, the House has passed three bills that would overhaul the mortgage industry, make it easier for borrowers in underserved areas to obtain Federal Housing Administration loans and change the tax code so that mortgage debt forgiven through foreclosures is not counted as taxable income.

And on Thursday, the Bush administration announced a plan to freeze certain adjustable rate mortgages for five years in a deal with lenders to stem the housing crisis that is hurting the nation's economy.

Under Bush's plan, the industry also agreed to refinance the loans or move them into FHA-backed loans.

"Awful" was the word Rep. Ike Skelton used to describe the mortgage situation. He voted in favor of all three House bills.

"The lenders in many instances could have been more careful; sometimes you think the lenders have invited this trouble," said Skelton, D-Lexington.

"In my home county (Lafayette), the foreclosures are way up. It's the saddest thing in the world, it really is."

Rep. Roy Blunt voted in favor of the proposal to make more FHA mortgage money available. He voted against a bill that would provide more oversight of the mortgage industry.

"The first rule for the Congress (is) be sure we do no harm," said Blunt, R-Springfield. "What you don't want to do is set up a future lending environment where people won't loan money."

Blunt also voted against the bill to provide more tax relief to people who lose their homes but said he supports a temporary fix in the tax code.

Blunt's office said he voted against the tax relief bill because he opposed a Democratic provision that would have collected more taxes from people who sell their second houses and have more than $250,000 in profits.

Hardship on individuals

Foreclosures can take a huge a toll on individuals.

"It's a crisis for the individual," said Tonya Collister, director of housing for Consumer Credit Counseling Service of Springfield. Most of her group's time is spent counseling individuals about delinquent mortgages, she said.

"We are seeing people whose interest rate is going up and they can't pay it. They're stuck."

Bob Horton, executive director of the Urban Neighborhoods Alliance, said his group has counseled more than 2,000 people about mortgage credit issues during the past two years.

"That's not nearly enough," he said.

While Springfield's foreclosure problem is serious, it's not as grim as in other areas, some experts say.

"That's a fairly moderate increase compared to other more urban areas where property values grew in the double digits," said Daren Blomquist, a spokesman for RealtyTrac.

"There is less land speculation in an area like Springfield, so more people may be able to keep their homes," he said.

Blomquist said Nevada, California and Florida have the highest foreclosure rates in the nation largely because real estate speculation was rampant.

But local credit officials caution that the spike in foreclosures weakens the local economy and creates hardships for homeowners.

Last month, the U.S. Conference of Mayors issued a report that projected Springfield could lose $147 million in economic activity because of the growing number of foreclosures. The report projected more than $1 billion in losses for the state.

The study, prepared for the mayors group by the consulting firm Global Insight, based its projections on a variety of local factors including mortgage rates, foreclosures, delinquencies, housing startups, and home prices, according to the company.

Blunt said the projected losses are likely to be offset by what he called the region's "diverse and broad-based economy."

Missouri lawmakers applauded the president's plan, but Sen. Claire McCaskill said comprehensive legislation is needed to ensure that "we don't get into this mess again."

"Too many people were in it for the quick buck," she said.

The Senate has yet to consider mortgage reform. Sen. Christopher Dodd, D-Conn., chairman of the Banking, Housing and Urban Affairs Committee and a presidential candidate, is expected to introduce a bill as early as this week.

Republican Sen. Christopher "Kit" Bond is backing a plan included in a transportation and housing spending bill that would provide $200 million for Neighborhood Works America, a nonprofit group that would distribute money to local groups that provide credit counseling. President Bush supports the plan to provide additional money for credit counseling but has threatened to veto the bill because of its overall costs.

Bond attributed the foreclosure crisis to "too many zero down payment loans." He said providing loans to "people who are not financially able to buy a home is one of the things that has to be stopped."

 

 

For more Missouri foreclosure news and related stories please check back to the Missouri Foreclosure home page.

Article Source http://www.news-leader.com/apps/pbcs.dll/article?AID=/20071210/NEWS01/712100383/1007/NEWS01