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Rep. Gary Peters Says Bipartisan Legislation Could Help More Homeowners Avoid Foreclosure

The 9th District Congressman was in Farmington Hills today to push the Preserving American Homeownership Act, which would reward those who make regular mortgage payments with principal reduction.

If you're making mortgage payments on a home that's "under water," help may be on the way.

Congressman Gary Peters (D-9th District) today visited , a Farmington Hills nonprofit, to promote the Preserving American Homeownership Act. The bill, which Peters said has bipartisan support, would help homeowners by reducing the principal on their loans when they make regular payments.

"We have people who are struggling to make their payments and are very fearful that they will be losing their home and going into foreclosure," he said. "We know that foreclosure doesn't just impact that family, it impacts that neighborhood."

The proposed legislation would allow lenders and loan servicers to reduce the principal on a loan for homeowners who are approaching foreclosure, with no other alternative to lower their payments.

"What will happen is if they continue to make payments on that property, they will immediately see the loan value drop to 115 percent ... and if they continue to make those payments over a three year period, it'll be staggered... and then drop to 95 percent over home value," Peters said.

If the homeowner later sells the home for a profit, that profit is shared 50/50 with the lender, Peters added. He called it a "common sense approach," and Philip Seaver of Farmington Hills-based Seaver Title Company agreed. 

"It is a realistic program," he said. "From the investor view point, it provides a rate of return, or potential rate of return, as the values come back."

Seaver said home values are essentially capped when foreclosed properties are included as appraisers look at comparable sales in a neighborhood. "We welcome the opportunity to have less foreclosures, less overgrown lots, less 'blighted' properties," he said. 

Oakland County Treasurer Andy Meisner said the foreclosure crisis has cost the county about $14 billion in taxable value, "and really the bulk of that is the result of the foreclosure crisis."

GreenPath president and CEO Jane McNamara said principal reduction provides incentives for homeowners to stay in their homes, and not walk away because they owe more than the home is worth. She said "drastic action" is needed to "protect the American dream and stabilize our neighborhoods, and this is a step in the right direction."

mike smith July 04, 2012 at 02:23 AM
Larry without Herbie alias MJ we would not have to anything to laugh at, big words, no sense
herbert heizer July 04, 2012 at 02:50 AM
i just moved into Clawson and have read the replies of Herb I cant believe someone with a similiar name to me can be so ignorant with his writings
dave July 04, 2012 at 04:23 AM
Dave Leach So here is something to consider in responce to those that say people bought homes they couldn't afford. When I bought my home in 1998 I could afford it and continued being able to afford it for several years after. Then my now ex wife decided to file for divorce and of course the home had to go as I could now not afford it and neither could she when our incomes were split and she took half of mine. I was quite surprised to find out that what was a great deal in 1998 was now worth about twenty grand less then I payed for it in 1998 and after real estate commissions and the cost to put in a new furnace I was underwater on it at a time that I had next to nothing. So it was foreclosed. This is a very common theme give or take the divorce among many people I've met that have lost their homes. In effect what I'm saying is that everything was overpriced from around 1997 to the crash. If you bought a house then, any house whether you were stretching your limit or not and you didn't put a substantial downpayment on it you are/were underwater. And by substantial I mean I would have had to put forty percent down been able to sell it with no out of pocket of which I had no pockets left. This is my own story and its fairly relevant I believe to the situation. And I have to say that when all this happend the full effect of the housing crash hadn't fully hit the real estate market. After taking the house back the fixed it up and still got less than I paid years earlier.
dave July 04, 2012 at 04:35 AM
In regards to Glass Stegull, by the time it was repealed it had been watered down by interpretations that the only thing it was doing was stopping the smith barney, travelers, citicorp merger. All the problems that happened revolved around derivitives which were secured with suprime mortgages and then sold as moodys AAA rated investments. This was happening for years before the act was repealed as I said due to governing bodies creative interpretations of the law. There is a very good article on PBS's Frontline series from april that spells this out. Its a few parts but well written. www.pbs.org/wgbh/pages/frontline/money-power-wall-street/
dave July 04, 2012 at 04:59 AM
Herb, your statements about banks clamoring for loans at 12% is true but there is another angle to their motive. These banks were making more on the derivitive end of the mortgage bundling in synthetic default cdo etc... investments and needed more paper to issue these things through their investment sides where they were making huge returns on them until the first signs of true recession hit and everything started to cascade. And as a side note Mr. Peters idea sounds reasonable and how its going to burn tax dollars as some here have said is beyond me. I mean it doesn't seem to have any need of tax money to fund anything since there is no financial obligation by the government. I would lower the initial equity to a 100% though instead of 115%. It will be and easier sell to those that could be in a postion to keep their home and make the payments. I mean 100% with all other components the same I think would result in a better participation rate which would aggregate out to a better return for the banks as well increase its effectiveness.

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