“President Obama’s Housing Affordability and Stability Plan will allow millions of homeowners to refinance their mortgages even if they are severely “underwater.” We finally have the most aggressive tools necessary to aid hardworking families hammered by the economic downturn when we couple the new Obama rescue plan with historically low interest rates, homebuyer tax credits and bankruptcy protection as a last resort.”

 
With President Obama’s housing plan and passage of the Helping Families Save Their Homes Act, Congresswoman Kathy Castor expects a large, new wave of loan refinancings for Tampa Bay area families at her next foreclosure prevention workshop – her fourth since the onset of the economic crisis. “Families should not wait for the workshop but should take action now to refinance their loans under the new Obama plan by contacting their loan servicer or lender,” Castor said.

The Homeowner Stability Initiative, in particular, which will reduce the amount homeowners owe per month for families who are as much as 150 percent underwater, will help hard-pressed homeowners stay in their homes. In addition, the U.S. House passed an additional prod to banks to refinance by allowing homeowners at the end of their rope to modify home loans in bankruptcy.

“Most families will not have to declare bankruptcy just to modify a loan because the new Obama housing plan finally creates a broad loan modification initiative. Families need a lifeline and a little breathing room during this economic crisis and precipitous drop in property values,” Castor said. “Families simply want an opportunity to refinance so they can stay in their home and neighborhood.”

Florida and the Tampa Bay area have been particularly hard hit by the housing crisis. Florida has the second highest foreclosure rate in the nation. In the Tampa Bay area, home prices plummeted approximately 21 percent from the third quarter of 2007 to the third quarter of 2008.

In addition to plummeting home values, there are other not so obvious reasons for the community to insist banks work with families to avoid foreclosure. This crisis can overwhelm our court system. Hillsborough Circuit Court had 18,867 new foreclosure cases through November 2008 – a stunning 96 percent increase over the previous year. Foreclosure cases are now taking up 64 percent of the circuit docket.

“Banks and lenders must work with homeowners to modify loans so these cases do not end up costing all of us in the community so much more,” Castor said.

The Center for Responsible Lending projects 14,658 foreclosures in 2009 and 48,805 foreclosures during the next four years in Castor’s congressional district, which includes Tampa and parts of Hillsborough, Pinellas and Manatee counties.

A bold foreclosure prevention plan should have been implemented last year, but was resisted by former President Bush. Meanwhile foreclosures and drops in property values have cascaded throughout the Tampa Bay area.

The housing crisis is at the heart of the recession and affects not only those directly facing foreclosures but their neighbors as well. Economists have said each foreclosed home reduces nearby property values by as much as 9 percent. Stemming foreclosures will help increase home values.

The Helping Families Save Their Homes Act will allow bankruptcy judges to modify loan terms for existing mortgages as a last resort. Castor said it is fair and equitable to allow this because every other loan, asset and debt can already be modified in bankruptcy except a principal residence.

President Obama’s plan takes into account that, as is the case in Florida, the value of homes has steeply declined and many homeowners owe far more than their mortgages are worth. His plan allows loan modifications for homeowners who owe 150 percent of the value of their home, and possibly more.

Castor has met with hundreds of families during the three foreclosure assistance workshops. Those attending have said they appreciate the opportunity to sit down with counselors and banking experts one-on-one. Castor is planning a fourth foreclosure assistance workshop for Saturday, April 18, at Middleton High School.