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Washington, D.C.—Today, Congressman Elijah E. Cummings (D-Md.), a member of the Joint Economic Committee, introduced the Temporary Mortgage Assistance Act of 2009 (H.R. 3066), which would use unobligated TARP funds to provide short-term, low-interest government loans to individuals who have lost their jobs and are in danger of foreclosure.
“As more and more workers lose their jobs, they become more vulnerable to foreclosure. Without a job, you have limited to no options for loan modification, and if you owe more on your house than it’s worth, your options to sell or refinance disappear,” Congressman Cummings said. “President Obama and the Democratic-led Congress have taken great strides to help struggling families survive the housing crisis, and this new legislation would ensure that the growing number of job-seeking homeowners have a chance to hang on to their homes—and their dreams.”
According to the Mortgage Bankers Association’s quarterly loan delinquency survey released late last month, about 5.4 million of the country’s 45 million home loans were delinquent—including those facing foreclosure—during the first quarter. Alarmingly, the less-risky prime mortgages surpassed subprime mortgages for the first time in the number of new foreclosures, with the rate of prime mortgage foreclosures doubling from this period last year. This increase among prime mortgage foreclosures is tied at least in part to rising unemployment.
The legislation introduced by Congressman Cummings would authorize the Secretary of Housing and Urban Development to provide loans to eligible homeowners for a period not exceeding 18 months or $30,000 in aggregate, at an interest rate not exceeding 3 percent. To qualify for a loan, a homeowner must be at least 60 days delinquent, be unemployed and registered for state unemployment benefits, and have a reasonable prospect for re-employment. Additionally, the homeowner must be underwater.
“For months, we have given hundreds of billions of taxpayer dollars to help stabilize the big banks on Wall Street, and now it is time to return that money to our neighbors on Main Street,” Congressman Cummings said. “These loans would be going to responsible men and women who did everything right but, because of the current economic crisis, now find themselves in need of a short-term boost while they seek new employment. We cannot allow them to fall through the cracks.”
The loans would be paid directly to a homeowner’s mortgage company, and the amount of the loans would be based on the percentage of household income lost during unemployment. For instance, if an individual’s job loss means a 60 percent reduction of household income, a loan would be issued in the amount of up to 60 percent of the mortgage payment. Although loans will accrue interest during the loan period, repayment will not begin until 60 days after the loan ends.
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