By Eugene T. Lowe
December 17, 2007

Senators Norm Coleman (MN) and Christopher Dodd (CT) introduced individual bills on December 12 that would address the nation’s growing mortgage foreclosure crisis. Coleman’s bill, the Community Foreclosure Assistance Act of 2007, would provide $1 billion in emergency Community Development Block Grant (CDBG) funding to local governments and states to respond to the impact of the subprime crisis. Dodd’s bill, the Homeownership Preservation and Protection Act of 2007, would help protect homeowners and prevent abusive and predatory subprime mortgage lending.

Coleman’s bill would allow CDBG funds to be used for foreclosure-based rental assistance to renters. In a letter in support of the bill, the Conference of Mayors, along with several other organizations of local elected officials and housing and community development directors, commended Coleman’s “legislative initiative which not only provides additional funding for CDBG, but allows more flexibility in the program by increasing the public services cap from 15 percent to 25 percent and lowers the current low and moderate income requirement from 70 percent to 50 percent.” The bill also allows local governments and states to request a general waiver to further provide foreclosure assistance. The organizations’ letter requested that the legislation permit ten percent of the funds be used for administrative costs.

Key provisions of Dodd’s legislation (as reported by a U.S. Banking Committee summary) include:

• Realign the interests of the mortgage industry with borrowers to insure the availability of mortgage capital on fair terms both for the creation and sustainability of homeowership;

• Establish new lending standards to ensure that loans are affordable and fair, and provide for adequate remedies to make sure the standards are met; and

• Create a transparent set of rules for the mortgage industry so that capital can safely return to the market without bad lending practices driving out the good.