| Overview of Program |
| Foreclosure Prevention Act of 2008 |
The plan combines large tax breaks for
homebuilders and a $7,000 tax credit for people
who buy foreclosed properties, as well as $4
billion in grants for communities to buy and fix
up abandoned homes.
Help families keep their homes by increasing pre-
foreclosure counseling funds, expanding
refinancing opportunities, and amending the
bankruptcy code to allow the modification of
nontraditional and subprime mortgages on
primary residences;
Help communities impacted by foreclosures by
allowing localities with high foreclosure rates to
access Community Development Block Grants
(CDBG) funds to purchase foreclosed properties
for rehabilitation, rent or re-sale;
Help struggling businesses recover by expanding
the carryback period from two years to five for
them to utilize losses incurred in 2006, 2007 and
2008 to offset prior years’ income; and
Help families avoid foreclosure in the future by
amending the Truth-in-Lending Act to improve
loan disclosures during the original loan and
refinancing process.
Increasing pre-foreclosure counseling funds.
Title III of S. 2636 would provide $200 million in
additional funding that would help housing
counselors continue their outreach to families at
risk of foreclosure. These added funds would
help as many as 500,000 additional families
connect with their mortgage servicer or lender to
explore options that will keep them in their
homes.
Providing an additional $10 billion of tax-exempt
private activity bond authority and allowing
housing finance agencies to issue bonds for
refinancings. Title I of S. 2636 would allow
housing finance agencies to use proceeds from
mortgage revenue bonds to refinance subprime
loans, to provide mortgages for first-time home
buyers, and for multifamily rental housing.
This increased lending activity would support
economic growth by creating new jobs,
generating federal, state, and local revenues, and
inspiring home-related consumer spending.
The Administration’s Budget for Fiscal Year 2009
included a similar provision to allow tax-exempt
qualified mortgage bonds to be used to refinance
home mortgages to provide relief for subprime
borrowers.
homebuilders and a $7,000 tax credit for people
who buy foreclosed properties, as well as $4
billion in grants for communities to buy and fix
up abandoned homes.
Help families keep their homes by increasing pre-
foreclosure counseling funds, expanding
refinancing opportunities, and amending the
bankruptcy code to allow the modification of
nontraditional and subprime mortgages on
primary residences;
Help communities impacted by foreclosures by
allowing localities with high foreclosure rates to
access Community Development Block Grants
(CDBG) funds to purchase foreclosed properties
for rehabilitation, rent or re-sale;
Help struggling businesses recover by expanding
the carryback period from two years to five for
them to utilize losses incurred in 2006, 2007 and
2008 to offset prior years’ income; and
Help families avoid foreclosure in the future by
amending the Truth-in-Lending Act to improve
loan disclosures during the original loan and
refinancing process.
Increasing pre-foreclosure counseling funds.
Title III of S. 2636 would provide $200 million in
additional funding that would help housing
counselors continue their outreach to families at
risk of foreclosure. These added funds would
help as many as 500,000 additional families
connect with their mortgage servicer or lender to
explore options that will keep them in their
homes.
Providing an additional $10 billion of tax-exempt
private activity bond authority and allowing
housing finance agencies to issue bonds for
refinancings. Title I of S. 2636 would allow
housing finance agencies to use proceeds from
mortgage revenue bonds to refinance subprime
loans, to provide mortgages for first-time home
buyers, and for multifamily rental housing.
This increased lending activity would support
economic growth by creating new jobs,
generating federal, state, and local revenues, and
inspiring home-related consumer spending.
The Administration’s Budget for Fiscal Year 2009
included a similar provision to allow tax-exempt
qualified mortgage bonds to be used to refinance
home mortgages to provide relief for subprime
borrowers.
Changing the Bankruptcy Code to allow a judge to modify the mortgage of a debtor. Title IV of S. 2636
would help more than 600,000 financially-troubled families keep their homes by permitting a bankruptcy
judge to modify their mortgages. S. 2636 would eliminate a provision of the bankruptcy law that prohibits
modifications to mortgages on the debtor’s principal residence for eligible homeowners. Homeowners
would be required to pass a means test to verify their inability to pay off the current mortgage and only
nontraditional and subprime mortgages already originated as of the date of enactment would be eligible
for modification. Judges would be allowed to reduce interest rates to the prime interest plus a reasonable
premium for risk and would be prohibited from extending the life of the loan beyond 30 years. Moreover,
the bill would provide that if a family sells their home within five years of the mortgage modification, the
lender would receive any increase in market value up to the original loan amount.
Providing $4 billion in funding for communities to purchase and redevelop foreclosed-upon
properties. Homes that have been foreclosed-upon and are sitting unoccupied on the market
can sap neighboring homes of their value, and lead to a cycle of community distress. Title II
of S. 2636 allows localities with the highest foreclosure numbers and rates access to
Community Development Block Grant (CDBG) funds to use toward purchasing these
properties, rehabilitate them if necessary and rent, re-sell or otherwise redevelop them.
Productive occupancy of foreclosed homes will help stimulate economic activity and help
prevent further loss of home equity in struggling neighborhoods.
Providing additional relief for the businesses struggling the most – including America’s
homebuilders – from the housing crisis. For companies losing money in this economic
downturn, Title VI of S. 2636 would extend the period to apply excess net operating losses
to income from prior profitable years and receive any applicable tax refunds.
For 2006, 2007, and 2008 losses, the “net operating loss (NOL) carryback” would be
extended to five years from the two years currently in law. By extending the NOL carryback
provision from two years to five years the bill simply accelerates the tax benefit of current
losses from future years and gives struggling companies cash infusions they need to stay
afloat.
Simplifying disclosure on mortgages documents. Title V of S. 2636 would amend the Truth-
in-Lending Act (TILA) to improve the loan disclosures given to individuals and families not
only when they apply for a home purchase loan, but also when they refinance their home. In
particular, S. 2636 would require:
Firm disclosure of the terms of the mortgage loan, no later than seven days before closing,
and, if the terms change, no later than three days before closing; and
Disclosure of the maximum loan payment under the loan, not only at application, no later
than seven days before closing, but also, if it changes, no later than three days before
closing
S. 2636 also would clarify that lenders are subject to statutory damages for violations of
TILA disclosure provisions and increase the damages for mortgage violations from $2,000 to
$5,000 per violation.
would help more than 600,000 financially-troubled families keep their homes by permitting a bankruptcy
judge to modify their mortgages. S. 2636 would eliminate a provision of the bankruptcy law that prohibits
modifications to mortgages on the debtor’s principal residence for eligible homeowners. Homeowners
would be required to pass a means test to verify their inability to pay off the current mortgage and only
nontraditional and subprime mortgages already originated as of the date of enactment would be eligible
for modification. Judges would be allowed to reduce interest rates to the prime interest plus a reasonable
premium for risk and would be prohibited from extending the life of the loan beyond 30 years. Moreover,
the bill would provide that if a family sells their home within five years of the mortgage modification, the
lender would receive any increase in market value up to the original loan amount.
Providing $4 billion in funding for communities to purchase and redevelop foreclosed-upon
properties. Homes that have been foreclosed-upon and are sitting unoccupied on the market
can sap neighboring homes of their value, and lead to a cycle of community distress. Title II
of S. 2636 allows localities with the highest foreclosure numbers and rates access to
Community Development Block Grant (CDBG) funds to use toward purchasing these
properties, rehabilitate them if necessary and rent, re-sell or otherwise redevelop them.
Productive occupancy of foreclosed homes will help stimulate economic activity and help
prevent further loss of home equity in struggling neighborhoods.
Providing additional relief for the businesses struggling the most – including America’s
homebuilders – from the housing crisis. For companies losing money in this economic
downturn, Title VI of S. 2636 would extend the period to apply excess net operating losses
to income from prior profitable years and receive any applicable tax refunds.
For 2006, 2007, and 2008 losses, the “net operating loss (NOL) carryback” would be
extended to five years from the two years currently in law. By extending the NOL carryback
provision from two years to five years the bill simply accelerates the tax benefit of current
losses from future years and gives struggling companies cash infusions they need to stay
afloat.
Simplifying disclosure on mortgages documents. Title V of S. 2636 would amend the Truth-
in-Lending Act (TILA) to improve the loan disclosures given to individuals and families not
only when they apply for a home purchase loan, but also when they refinance their home. In
particular, S. 2636 would require:
Firm disclosure of the terms of the mortgage loan, no later than seven days before closing,
and, if the terms change, no later than three days before closing; and
Disclosure of the maximum loan payment under the loan, not only at application, no later
than seven days before closing, but also, if it changes, no later than three days before
closing
S. 2636 also would clarify that lenders are subject to statutory damages for violations of
TILA disclosure provisions and increase the damages for mortgage violations from $2,000 to
$5,000 per violation.
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