Bill to Protect Homeowners and Prevent Home Foreclosures Introduced

WASHINGTON, DC — Sept. 30, 2016, U.S. Sen. Cory Booker (D-NJ) along with U.S. Sen. Robert Menendez (D-NJ) announced they have introduced the Homeowner Foreclosure Reduction Act of 2016, legislation that would help keep families in their homes by providing nonprofit organizations and local governments an opportunity to increase their purchase of non-performing loans from Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA).
“The recession and financial crisis put unprecedented strain on New Jersey homeowners. New Jersey’s foreclosure rate remains unacceptably high, and thousands of New Jerseyans are at risk of foreclosure because they are still underwater on their mortgages or behind on their payments,” said Sen. Booker. “Stable home ownership is good for families and communities. Our bill will make it easier for nonprofit organizations in New Jersey and across the country who are already helping to provide relief to these homeowners expand their efforts and help more families.”
“Far too many New Jersey families are still reeling from the lasting impacts of the collapse of the housing market during the Great Recession, and we need solutions that create better outcomes for homeowners and neighborhoods,” said Sen. Menendez. “Sustainable and affordable homeownership has always been the bedrock of the American dream, and community-based nonprofits are a critical ally in our work to assist underwater borrowers and prevent foreclosures. As such, this commonsense bill will allow more nonprofits to help New Jersey families stay in their homes, create affordable housing options, and keep making progress to improve our neighborhoods.”
As of June 2016, 778,000 loans backed by the FHA, or owned by Fannie Mae and Freddie Mac, have become severely delinquent. 146,000 of these loans have been sold through an auction process to private equity funds, hedge funds, and nonprofits. Although nonprofits have kept more homeowners in their homes compared to private entities, only 2 percent of the loans have been sold to nonprofits in the current process. The Homeowner Foreclosure Reduction Act of 2016 would require the FHA, Fannie Mae and Freddie Mac to sell more non-performing loans in smaller, geographically targeted pools, thereby allowing more nonprofits to bid on the pools.
If enacted, the Homeowner Foreclosure Reduction Act of 2016 would:
• Create smaller, local pools: 50% of loans sold by FHA in any given sale and 25% of those sold by Fannie Mae and Freddie Mac would be required to be sold in smaller, geographically targeted (covered) pools of loans.
• Give nonprofits the last look on price: If a for-profit entity wins the auction of a covered pool, the nonprofit with the highest bid will be given 48 hours to match the winning bid.
• Make a commitment to home retention: Purchasers of covered pools must achieve a positive outcome for at least 50 percent of the loans in the pool.
• Allow nonprofits to bid on individual loans in larger, non-covered pools.