April 10, 2008
Press Release

U.S. Senate Passes Critical Housing Legislation that Includes Reed's Mortgage Disclosure Improvement Act

WASHINGTON, DC – In a step to help stem the tide of foreclosures and prevent future housing crises, the U.S. Senate today voted 84-12 to pass the Foreclosure Prevention Act of 2008, which contains a key provision authored by Senator Jack Reed (D-RI) to strengthen and simplify mortgage disclosure requirements. 

The Senate bill provides $150 million in grants to nonprofits that counsel struggling homeowners on avoiding foreclosure; $10 billion in federal tax-exempt private activity bond authority that will provide for the refinancing of subprime loans, mortgages for first-time homebuyers, and multifamily rental housing; almost $4 billion in new Community Development Block Grant (CDBG) funding to help communities impacted by foreclosures by allowing localities with high foreclosure rates to purchase foreclosed properties for rehabilitation, rent, or re-sale; assistance for returning soldiers to avoid foreclosure by lengthening the time a lender must wait before starting foreclosure from three months to nine months after a soldier returns from service and providing returning soldiers with one year relief from increases in mortgage interest rates; the requirement that the Department of Defense establish a counseling program to ensure veterans and active service members can access assistance if facing financial difficulties; and an increase in the VA loan guarantee amount, so that veterans have additional homeownership opportunities.  

Reed’s Mortgage Disclosure Improvement initiative will help ensure that, in the future, consumers are better informed of the terms of their loan and are warned of potential abuses.  By reforming the Truth-in-Lending Act, Reed’s provision will protect borrowers when they buy their home, as well as when they refinance a home or get a home equity line of credit.

“I am pleased that the Senate took this important first step to help more families refinance out of bad loans, stabilize the economy, and improve mortgage disclosures.  The legislation includes a provision I authored to require lenders to clearly spell out the maximum payment involved in any mortgage.  But we need to do more,” said Reed, a senior member of the Banking Committee.  “It is critical that in the coming weeks Congress pass legislation that will break the vicious cycle of foreclosures and help struggling families in Rhode Island and across the country.”

Rhode Island currently has the highest foreclosure rate in New England.  According to the most recent National Delinquency Survey from the Mortgage Bankers Association, 3.9% of the loans being serviced in the state are in foreclosure.  Foreclosure initiations were up 11.8% from the previous quarter.

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