OH-13 & 18: Space (D) and Sutton (D) Promote Mortgage Crisis Legislation

Kudos to Rep. Zack Space (D-Dover) and Rep. Betty Sutton (D-Copley Township) for continuing to take the lead on legislation to address the continuing mortgage crisis.

Yesterday the House Ways and Means Committee passed legislative language introduced by Space that would severely cut the "foreclosure tax" that occurs when mortgage debt wiped out in bankruptcy is treated as taxable income to the now homeless and bankrupt borrower. According to the press release, Committee Chairman Charles Rangel told Space that he "would like to applaud your leadership on this important issue, especially given that foreclosure rates in Ohio have risen 138% since August of 2006. Your state is just one example of the tremendous reach of the housing crisis, and its impact on working Americans."

“I am very pleased that the ideals set out in my Foreclosure Tax Relief Act are being incorporated into our legislative agenda,” Space responded. “The IRS should stop adding insult to injury when these families are obviously in financial trouble. This is great news for Ohio’s working families.”

As for Sutton, she has introduced two bills. The Foreclosure Prevention and Homeownership Protection Commission Act creates a Federal commission charged with analyzing the underlying causes of the subprime mortgage crisis and recommending legislative and regulatory actions that would help homeowners avoid foreclosure and unfair rate increases. “This issue is much more basic, more fundamental than partisan politics,” Sutton said. “We need a bipartisan commission with the expertise and authority to find the causes of the current crisis, and to offer up real solutions. Congress has already taken action to address some of the immediate causes of this crisis, but we must also find the root causes and come up with long-term solutions. There’s no reason to keep patching a broken system if we can repair the system from the inside out.”

The bipartisan commission, which would include representatives of Fannie Mae, Freddie Mac, and the U.S. Department of Housing and Urban Development, is modeled in part on the commission created by Gov. Ted Strickland, who praised Sutton's bill. “In representing a state that has been hit particularly hard by foreclosures, Congresswoman Sutton understands first-hand the devastating effects of this crisis on our homeowners,” said Strickland. “Ohio’s Foreclosure Prevention Taskforce, created in March, has been instrumental in studying and providing solutions to an escalating foreclosure problem in our state, and I strongly support Congresswoman Sutton’s efforts to establish a commission to address these issues on a national level.”

Sutton’s second bill, the Fair Disclosure for Homeowners Act, deals with adjustable-rate mortgages (ARMs). “Many homeowners with ARMs are being caught by surprise when their monthly mortgage payments increase sharply overnight,” said Sutton. “Mortgage rate sneak attacks are bringing a lot of suffering and hardship to American families. This bill would require creditors to send a notification, separate from their monthly mortgage statements or any other notices, to homeowners holding ARMs six months before rates are due to change.”

The notification would include the creditor’s best estimate of the homeowner’s new monthly payments, contact information for Federal and state government agencies that homeowners can contact to get help, options homeowners can pursue if they anticipate difficulty meeting their payment obligations after the rate resets. The bill also requires creditors to include the reset date on all monthly statements.