Sen. Brown Tries to Salvage Some Good From Watered-Down Foreclosure Bill

All February the GOP filibustered efforts in the U.S. Senate to assist homeowners at risk. Now they've abandoned that tactic, but they've succeeded in negotiating concessions that resulted in the pending Dodd-Shelby substitute amendment. Former Clinton Labor Secretary Robert Reich derides this diluted measure as "something Herbert Hoover would have been proud of," principally because it "leaves out the most important things distressed homeowners need" – (1) changing bankruptcy law so borrowers have enough bargaining power to get refinanced, and (2) letting the Federal Housing Administration guarantee the refinanced loans if lenders reduce the amounts the borrowers owe to reflect the reduced home values.

In a press conference call yesterday, Sen. Sherrod Brown (D-Avon) conceded that the bankruptcy provision now at risk is a critical piece of the puzzle as far as providing real relief to homeowners in danger. However, he is not letting this legislation slip through without at least trying to get something good out of it.

Today Sen. Brown's office announced that he has joined up with Sen. Patty Murray (D-WA), Sen. Charles Schumer (D-NY), and Sen. Bob Casey (D-PA) to propose a change to the Dodd-Shelby amendment that would double the funding for mortgage counselors that assist borrowers at risk of losing their homes, from $100 million to $200 million. The need for this funding is demonstrated by the fate of $180 million for such counseling allocated by the the Omnibus Appropriations bill earlier this year:

Demand for counseling services was so high that NeighborWorks, the group charged with managing the funds, received applications for $340 million in grants to combat the foreclosure crisis in the two weeks applications were available. Of the funds approved by Congress, $130 million was awarded to counseling groups within sixty days of enactment. The remainder of the appropriation is being held by NeighborWorks as an emergency fund for the massive wave of foreclosures expected to hit this summer, which means they have no additional funds to award to communities struggling today. If Congress provides additional foreclosure prevention funding, NeighborWorks can award counselors with much needed funding now and also this summer, reaching hundreds of thousands of additional homeowners on the verge of foreclosure.

It isn't a huge improvement, but everything that can be done to deal with the avalanche of foreclosures across the country helps.

"Housing counseling can help thousands of families stuck in bad subprime loans," said Sen. Brown in the press release. "These are middle class families, and we need to help keep them in their homes. Housing counseling is proven, it works, and we need to fund it."

UPDATE: Bill Callahan has more, including a joint statement by concerned organizations objecting to the compromise bill, and linking Sen. George Voinovich's praise for the bad bill to campaign contributions he receives from banking and mortgage industry interests.