The home loan foreclosure situation has reached a "crisis" level, according to U.S. Senator Tom Harkin. The Iowa Democrat is cosponsoring what’s being called the Foreclosure Prevention Act, which should reach the Senate floor next week. Harkin says many of the two-million borrowers who face foreclosure nationwide are families who need and deserve a chance to rework their mortgages so they can keep their homes.
"Currently, distressed borrowers are not allowed to rework their mortgages on primary homes in bankruptcy proceedings. People remain trapped in mortgages with sky-high interest rates and they have no choice but to forfeit their homes. This makes no sense," Harkin says. He says the owners of vacation homes can rework their mortgages, so it should only follow that primary homeowners have the same opportunities.
Harkin says he’s confident this bill could help the ailing home mortgage industry, and in turn, the nation’s economy, which he says is slipping into recession. Harkin says: "Borrowers who have been lured into junk loans deserve a chance to keep their homes. The bankruptcy provision in our bill would give lenders a strong incentive to work with borrowers voluntarily and proactively. Our bill would not leave financial institutions with losses by letting families completely escape their financial obligations. The whole point is to give people an alternative to default, which is bad for both the lender and the borrower."
Harkin says the number of homes facing foreclosure nationwide last month jumped by 57-percent. Harkin says: "So far, Iowa is faring better than some other states. None the less, it’s estimated that more than 11-thousand Iowa homeowners will suffer foreclosure in the period ahead. The ripple effect will be even greater. Nearly 180,000 homes in Iowa will experience price declines simply because they’re near the houses that are in foreclosure."
He blames bank regulators for being "asleep at the switch" and letting this situation develop by allowing irresponsible, predatory lenders to hook borrowers into sub-prime mortgages with hidden fees and exploding interest rates.