Barney Frank Drafts Bill on Mortgage Crisis

Leglisation is drafted aimed at easing the crisis in the real estate and mortgage markets by allowing to buy up abandoned property. One lawmaker spearheading the effort says it's critical to get the economy moving again. Pat Hernandez has the story:
Two bills pending in the House Financial Services Committee are aimed at stemming the rise in foreclosures. Massachusetts Democratic Congressman Barney Frank who chairs the committee, says one measure would have the federal government loan states money to buy foreclosures. It would return them to tax the rolls while preventing them from becoming blights on neighborhoods:

"In effect what happens is not just that the neighborhood gets hurt, but the cities, which used to collect property taxes from these places, are now expending tax dollars to send the police, to send the fire department, to send the sanitary inspectors or the water department to protect their property. So, we want to get that property out of foreclosure."

The other measure would focus on preventing foreclosures:

"If the holders of the loan will reduce that loan to the level that the property is now worth and there's then a chance for that person to repay, a very good chance, we will use the Federal Housing Administration, the FHA, to give that new loan a guarantee. In other words, people could re-finance at the lower level. And then it will be able to be sold into what we call the seculary market, fannie mae and freddie mac. It'll get the housing market moving again and it will clearly prevent hundreds of thousands of foreclosures, maybe a million, nobody can be sure. Again, no taxpayer money will go either to reduce the mortgage or to pay it off."

Frank says the subprime mortgage market was under-regulated, resulting in too many bad loans. Rick Smith is president of the Texas Bankers Association:

"We think that this piece of legislation is fair and reasonable and as the chairman indicated, it's voluntary for the lenders to be willing to write down the balance of the loan to some more reasonable level that borrowers can afford, and anything that will stimulate the economy and help stem this problem we're in favor of."

Smith says while the Texas market is not as bad as other places in the country, there were more than 184-thousand prime & subprime mortgages in delinquency last year.

Pat Hernandez...KUHF Houston Public Radio News
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Pat Hernandez

Reporter

Pat Hernandez is a general assignments reporter who joined the KUHF news staff in February of 2008...