Civil Rights Groups: Mortgage Bill in the House Is a Positive First Step, but Not Enough
Feature Story by Angela Okamura - 5/7/2008
As Congress continues to discuss the growing home foreclosure crisis, the House is planning to vote today on a bill that is an important first step to helping thousands of families pay their mortgages and stay in their homes.
The FHA Housing and Homeowner Retention Act of 2008, sponsored by Rep. Barney Frank, D. Mass., will let the Federal Housing Administration (FHA) provide up to $300 billion in loan guarantees to help homeowners refinance into more affordable mortgages. The FHA is a government agency that insures mortgage loans made by FHA-approved lenders.
Civil rights groups agree that while this bill will help some struggling homeowners, it is incomplete without a bankruptcy relief provision like the one that supporters tried to add to a Senate foreclosure bill. A bankruptcy-relief provision would give borrowers who face foreclosure a second chance to keep their homes through the Chapter 13 bankruptcy process.
The Leadership Conference on Civil Rights (LCCR) issued a letter to the House on behalf of such an amendment, stating its concern with sending the FHA bill to the floor without the bankruptcy provision. The letter states: "We are concerned that the voluntary nature of the legislation will not be enough to help homeowners in danger of foreclosure."
The letter goes on to suggest that far stronger incentives should be provided for lenders to rewrite bad loans, which would provide a safety net to families that may otherwise "fall through the cracks."
Bankruptcy-relief legislation has been on a rocky road in the Senate, where it was derailed twice in the last two months. Under pressure to address the growing wave of foreclosures, the Senate reached a bipartisan compromise in early April on the Foreclosure Prevention Act, a package its supporters claim addresses problems in the housing and lending industries.
The bill initially included bankruptcy relief for troubled borrowers, but in the wake of strong opposition from the lending industry, the bankruptcy provision was left out of the version of the bill that ultimately reached the Senate floor. Sen. Richard Durbin, D. Ill., tried to restore the provision to the bill, but lending industry-backed opponents in the Senate managed to block his efforts.
Civil rights groups continue to push for bankruptcy relief. According to Wade Henderson, president and CEO of LCCR, the addition of a bankruptcy provision to a package such as the FHA bill "could provide the most significant remedy available to homeowners."
