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Loan Restructuring, FHA Reform Keys to Relief

It’s no secret that this Congress has been painfully slow in moving legislation to the president’s desk. But for the downward- spiraling housing industry, this slow pace may be both a blessing and a curse.

Indeed, some aspects of the market will correct themselves, as many on Wall Street have suggested. However, borrowers, lenders and investors alike remain skittish as daily reports of foreclosures undermine their confidence and feed concerns that the worst is yet to come. So the question remains: What can Congress do now to reduce uncertainty in the mortgage market and help more Americans keep their homes? While there is no silver bullet, I believe Congress has three good options that could and should be implemented in time for Christmas.

First, Congress can use its bully pulpit to pressure lenders to restructure the bulk — not a few — of the loans held by those facing foreclosure. Recent reports indicate that loan modifications and workouts are still few and far between. As a result, borrowers who genuinely want to meet their mortgage obligations don’t have any good options once their low-interest or “teaser” rate expires and their payments skyrocket. Lenders need to step up to the plate: Be creative now, be responsible now, and transition troubled homeowners into more conventional loans — now.

“Now” is a word that Members of Congress should shout from the rooftops. The formation of the HOPE NOW Alliance, a public-private partnership recently established to help troubled borrowers, is a good first step. Troubled borrowers can visit or call 888-995-HOPE to get help. But more action should be taken. Everyone loses when a property enters foreclosure. Restructuring a majority of at-risk loans is a win for homeowners, a win for lenders, a win for the investors and, ultimately, a win for the economy.

Second, Congress needs to reform the Federal Housing Administration. By bringing the program into the 21st century, Congress can give first-time homebuyers and those seeking to refinance a more viable alternative to higher-cost subprime loans or even predatory products. Many of the necessary reforms were included in the House-passed FHA reform bill (H.R. 1852), which would raise the loan limit for high-cost areas, decrease premiums for borrowers, allow no-down-payment loans and 40-year loans, and promote strong underwriting standards.

One bright spot in the FHA debate is the administration’s FHASecure initiative. This program gives qualified homeowners who had solid payment histories before their mortgages reset an opportunity to refinance with an FHA loan. FHASecure is a promising initiative that will help many borrowers.

The FHA helped troubled borrowers and boosted the housing market in the 1980s during the last major housing downturn, and it can do so today if we send a bill to the president. Instead, Congress is repeating the same dance from last year — the House has passed an FHA reform bill and the Senate is sitting on it. It’s time to put partisan politics aside and work out our differences on FHA reform legislation.

Third, Congress must continue to promote financial literacy. In 2005, Rep. Rubén Hinojosa (D-Texas) and I joined forces to form the House Financial and Economic Literacy Caucus. Now with more than 75 members, we have been formally promoting financial education programs, including housing counseling. Together, we can reach out to our constituents and let people know how to secure sound guidance about achieving home ownership and avoid foreclosure. Homeowners can call 800-569-4287 or visit to find the housing counseling agency nearest them.

We also must supply the Department of Housing and Urban Development with the funding it needs for the thousands of local, HUD-certified housing-counseling agencies across the country. These agencies are on the front lines, working hand in hand with Americans struggling to keep their homes. This year, I introduced a bill to do just that — H.R. 3019, the Expand and Preserve Home Ownership Through Counseling Act. I also joined with Rep. Michael Turner (R-Ohio) and the late Rep. Paul Gillmor (R-Ohio) to offer an amendment to the 2008 Transportation-HUD appropriations bill that will significantly increase resources for HUD-certified housing counseling. H.R. 3019 was added to H.R. 3915 just before Thanksgiving, and both the bill and the amendment have now passed the House.

Perhaps most importantly, Congress needs to stay open to new and creative ideas, from both sides of the aisle, for common-sense legislation to help avoid future foreclosures. We should closely examine bills like Delaware Republican Rep. Mike Castle’s Emergency Mortgage Loan Modification Act (H.R. 4178), which he recently introduced. The bill aims to provide the mortgage industry greater incentives to restructure at-risk loans.

American homeowners in mortgage trouble don’t need a handout, they need a helping hand. Members of Congress can provide this assistance. The question is: Will we do it?

Rep. Judy Biggert (R-Ill.) is ranking member of the Financial Services Subcommittee on Financial Institutions and Consumer Credit.

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