As President Barack Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act on Wednesday, the stage is now set to unleash a slew of regulations aimed at bank reforms.
The bank reform act also brings with it good news for those who are faced with increasing uncertainty regarding their homes and are facing the risk the foreclosure. In addition to programs targeted towards foreclosure prevention, the law will also set up Consumer Financial Protection Bureau, an independently funded institution to supervise and regulate mortgage and credit-card products including payday lenders that have hitherto been outside the scope of any regulation.
The reform package budgeted at $19 billion would also include $3 billion in new funds to help unemployed homeowners avoid foreclosure of their properties and another $1 billion for redevelopment by local governments of foreclosed and abandoned properties for sale to low and moderate income buyers.
The U.S. Department of Housing and Urban Development (HUD) will be in charge of figuring out the implementation details. But one thing is clear, it has to work on quickly determining how exactly to distribute a $1 billion emergency homeowners’ relief fund set aside for assistance for unemployed homeowners whose lenders have already initiated foreclosure proceedings. The legislation also directs that the program be start by October 1, 2010.
“HUD is reviewing the language to determine the best method of implementation.” said Lemar C. Wooley, a HUD spokesman.
For that, perhaps the HUD will look towards a Pennssylvania program that targets similar objectives of providing relief by way of financial assistance to unemployed homeowners. The relief program proposed in the legislation is modeled after the Homeowners’ Emergency Mortgage Assistance Program (HEMAP) in Pennsylvania.
As of now, through the Home Affordable Unemployment Program, out of work homeowners are eligible for at least three months’ forbearance on their mortgage loans. However, some experts do not think the current program does much for foreclosure prevention since the three month window is not adequate in the current economic conditions.
“In this economy, getting that next job hasn’t been a very quick thing,” said Julia Gordon, senior policy counsel for the Center for Responsible Lending.
“For the most part, these are people whose loans are sound, 30-year fixed-rate loans. The person is in a bad situation because they’re underwater in terms of equity and they can’t make payments. They can’t borrow against their house and in many cases can’t sell their house,”
About those homeowners who could be helped, Gordon says “We don’t know how many people are paid for with a billion dollars, but it is a great start.”
Previously, some states hit hardest by the foreclosure crisis received extra federal funds for foreclosure prevention. The new funding in the bank-reform bill will now reach out to unemployed homeowners in all parts of the country.
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It’s all about job creation. I’m not sure that bank reform can really be that effective.