Congressman Lincoln Davis Supports Measures Addressing Housing Crisis May 8, 2008

WASHINGTON, D.C. Today, the House of Representatives approved two comprehensive housing bills, the American Housing Rescue and Foreclosure Prevention Act of 2008 and the Neighborhood Stabilization Act of 2008, to stem the tide of home foreclosures and neighborhood destabilization.

"I fear the cost of inaction would allow the housing crisis to affect even more Americans and cause greater harm to our economy" said Congressman Davis. "This moderate approach to helping families facing foreclosure keeps the majority of responsibility where it should be, with borrowers and lenders."

A government-backed voluntary refinancing program will be expanded under the American Housing Rescue and Foreclosure Prevention Act, which would require lenders and borrowers to make certain compromises to be eligible. First, lenders and mortgage investors will be required to take a loss, and borrowers must share any profit from the resale of a refinanced home with the government. Additionally, since this bill is tailored to keep families in their homes, the program is open only to owner-occupied homes. Speculators, investors and vacation/second-home owners are not eligible.

The Neighborhood Stabilization Act of 2008 establishes a $15 billion loan and grant program for the purchase and rehabilitation of vacant, foreclosed homes. One half of the funds ($7.5 billion) are loans, and the other half ($7.5 billion) are grants.

The zero-interest loans under the bill will finance acquisition and rehabilitation costs. The federal government would be paid back through partial resale or refinance proceeds. In an attempt to ensure help for low and middle income families, homes covered under this law must be sold to families with incomes that do not exceed 140 percent of local area median income (AMI), and rental housing must serve families having incomes at or below local AMI.

Additionally, through the efforts of Congressman Davis, the bill includes language that requires states receiving funding under this bill to allocate a portion to affected rural areas.