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Rep. Gary Peters Says Bipartisan Legislation Could Help More Homeowners Avoid Foreclosure

The 9th District Congressman was in Farmington Hills today to push the Preserving American Homeownership Act, which would reward those who make regular mortgage payments with principal reduction.

If you're making mortgage payments on a home that's "under water," help may be on the way.

Congressman Gary Peters (D-9th District) today visited , a Farmington Hills nonprofit, to promote the Preserving American Homeownership Act. The bill, which Peters said has bipartisan support, would help homeowners by reducing the principal on their loans when they make regular payments.

"We have people who are struggling to make their payments and are very fearful that they will be losing their home and going into foreclosure," he said. "We know that foreclosure doesn't just impact that family, it impacts that neighborhood."

The proposed legislation would allow lenders and loan servicers to reduce the principal on a loan for homeowners who are approaching foreclosure, with no other alternative to lower their payments.

"What will happen is if they continue to make payments on that property, they will immediately see the loan value drop to 115 percent ... and if they continue to make those payments over a three year period, it'll be staggered... and then drop to 95 percent over home value," Peters said.

If the homeowner later sells the home for a profit, that profit is shared 50/50 with the lender, Peters added. He called it a "common sense approach," and Philip Seaver of Farmington Hills-based Seaver Title Company agreed. 

"It is a realistic program," he said. "From the investor view point, it provides a rate of return, or potential rate of return, as the values come back."

Seaver said home values are essentially capped when foreclosed properties are included as appraisers look at comparable sales in a neighborhood. "We welcome the opportunity to have less foreclosures, less overgrown lots, less 'blighted' properties," he said. 

Oakland County Treasurer Andy Meisner said the foreclosure crisis has cost the county about $14 billion in taxable value, "and really the bulk of that is the result of the foreclosure crisis."

GreenPath president and CEO Jane McNamara said principal reduction provides incentives for homeowners to stay in their homes, and not walk away because they owe more than the home is worth. She said "drastic action" is needed to "protect the American dream and stabilize our neighborhoods, and this is a step in the right direction."

R Gibson June 15, 2012 at 05:22 PM
Erin, do you really think the banks are going to pay for this? The banks are going to lobby that in order to do this the feds are going to have to kick something in. They are not going to take a hit to the balance sheet and profits in order to do this out of the kindness of their hearts. We don't have that money so we will have to borrow it from China. I am sorry you are very smart and have a good understanding of the issue, but I think you are being really naive as to who you think is going to pay for this.
R Gibson June 15, 2012 at 05:32 PM
Careful Jim. Name calling is not tolerated around here. You can have your opinion, and while you and I may not agree, i respect your opinion. However, you cross a line when you suggest that those of us who don't agree with your position are uneducated. It does not endear you to others.
Erin June 15, 2012 at 06:32 PM
RG - right with you. Banks/lobbyists will try to pass along costs, you bet. The real problem of this and so many gov't problems - money in politics. Money = Speech [Buckley v. Valeo 1976] + worst SCOTUS decision ever: Citizens United = the Wild West of lobbyist and campaign spending. $100 for a hammer instead of $9 at Target? $220 for that med instead of $17.50? Sweet, sweet deals and contracts, bought and paid for by lobbies, facilitated by our purchased Congress, upheld by our purchased Courts (2010 - MI was #1 nationwide for outside, unnamed monies in Court races), upheld again by SCOTUS, some of whom headline Conservative ThinkTank retreats that promise "special access to Supreme Court Justices" for the SuperPAC's leaders, big money contributors who attend. Gotta love democracy! Answer: campaign finance overhaul. Repeal Citizen's United.
Ella Hurner June 15, 2012 at 07:26 PM
If a homeowner has a modified home loan and the principal is still underwater, how will this proposal help them in reducing the principal owed. As it stands, it is an invitation to walk away or purchase another home for less, with the new property being more vauleble, than to continue to remain in a under water home. When a home across the street from you has been sold for 5,000.00 with taxes being 600.00 or less a year, and the principal owed on your home is 90,000.00, with taxes being 3,500.00 a year, what is the best solution for a homeowner?
Mark Itall June 16, 2012 at 12:08 AM
Erin, you are revising history. It was Barney Frank, Chris Dodd and President Clinton that started and pushed the "everyone needs a home" policy. It was already over the cliff when W (nor a fan of him) took over. Then the banks made it worse by bundling up garbage mortgage loans the government forced them to make into even bigger bags of garbage.
Erin June 16, 2012 at 01:23 AM
Hey Mark - Sorry, not trying to revise history - trying to compress and simplfy for space sake. "It was Barney Frank, Chris Dodd and President Clinton that started" - Yup. But, as you'll recall, it was in W's second term that the 0% down, interest only mortgages came in en masse. Also when MBS's and other exotic, complicated financial instruments became the fashion with municipalities who had no idea what they were investing in jumped in head first. And, the "more regulations always bad" philosophy ruled. But really, no one complained until it all went bad. Clinton got rid of Glass-Steagall in 1999. That was the snowball that started, before the avalanche. "Then the banks made it worse by bundling up garbage mortgage loans" - Yup, okay. "the government forced them to make into even bigger bags of garbage." Mmmm, not sure what you mean by that... Can you explain? Both parties were complicit for sure, but the height of the housing insanity WAS during W's term. And if the standard seems to be that whoever happens to be POTUS gets blamed for whatever happens during his/her time, then we did happen to have 9/11, fake Iraq War, US citizen rights revocation w/Patriot Act, horrible GDP and job growth under "Trickle down theory" tax policy, AND worst financial melt-down since the Depression under his watch. More worrisome - Romney has 18 of the 24 W foreign policy advisors signed on. And promising to double down on Trickle Down for economic policy. Argh.
Randy Jasky June 16, 2012 at 08:00 AM
Joni - What Mr. Peters does/doesn't know about this mess is anybody's guess. Being a politician, he is capable of saying anything, to any crowd. This bill may appear to give the banks incentive, but doesn't actually. This bill will just make it appear that our lawmakers are "doing something" despite the fact that what they're doing will be totally ineffective. The banks still have no real motive to keep a homeowner out of foreclosure. Even if the banks don't sell the repossessed property, they get to keep it on their books at whichever "value" they choose to assign it...with no basis in reality (or realty...hahaha). Erin - No, I'm afraid Peters really IS clueless, if he believes this bill will fix anything. I know very well how the Housing Bubble was blown (and why, and by whom) and what the results have been thus far, and what is likely to occur as a direct result. I can even say with some certainty what NEEDS TO happen, but nobody will like it. Given the choice of 1) cutting the rate/principal of a loan so the homeowner can afford the payments 2) selling the property and keeping 100% of the proceeds or 3) keeping it on your books at "mark to fantasy" valuation as an "asset" against which to borrow. Banks have been choosing #2 or #3, not #1, and this bill does nothing to change that.
Randy Jasky June 16, 2012 at 08:04 AM
It is not the job of the federal government to keep homeowners in their homes. It is not the job of the federal government to redistribute wealth. It is not the job of the federal government to pick "winners" and/or "losers" by deciding who gets modifications, or which banks can offer them. Not in the Constitution - Not the job of the government.
Randy Jasky June 16, 2012 at 08:09 AM
In that instance, the best solution for the homeowner would be to walk. Take the financial hit, and move on with their life. Let the bank sit on this steaming pile of "asset" and worry about its future disposition.
Jim Sparks June 16, 2012 at 03:07 PM
As I re-read my comment above, I cannot find where I called any individual a "name". I commented on the obvious, which is that those who wrote replies against the proposal failed to consider all the facts in the matter, which is the very definition of "uneducated" - at least on the subject at hand. If we're going to have to plan out our rhetoric to avoid even the possibility of anyone extrapolating a general statement into a personal attack... you might as well eliminate the comments section.
Erin June 16, 2012 at 06:51 PM
Jim - RE: "Not everyone who's home is facing foreclosure is "irresponsible" Let's not forget those who were foreclosed upon illegally with robosigning mills. Many folks whose homes have been paid off for years, or show that there's an mysterious unpaid amount for as little as $2.00. The stories are amazing. Not only that, but there are hundreds of thousands, if not more, of mortgages with "Origination" issues. Some banks stopped registering deeds and mortgage transactions in national deed databases, and stopped filing the "paper" paperwork with clerks as they kept flipping and bundling mortgages. So, literally, today, there are many, many, many people, banks and clerks who have no idea who owns loans/deeds. Crazy, it's going to take a long time to unwind this mess. So then there was the big bank settlement (really a pittance) to homeowner's who were foreclosed upon illegally. They were awarded $2,000 each, Wow, that'll get you a new house, eh? Block checks were sent to States to distribute to homeowners. 15 states have taken their big checks, and took chunks to plug holes in their State's general funds instead of giving all the $$ to those who were wronged and awarded the damages. Walker in WI, one of the worst. But at least that enabled him to say he filled in deficits in time for the recall election. Guess that's all that matters.
Erin June 16, 2012 at 07:00 PM
Randy - "not the job of the federal government to redistribute wealth" You're right! That's the job of private companies on Wall Street. ;-) Only half-joking.
Daryl Patrishkoff June 17, 2012 at 10:44 AM
This is a plan to help people who are underwater on their mortgage by reducing their principal, in other words free money that comes from the taxpayer. This is rewarding bad behavior, and yes sometimes bad things happen to good people, in those cases they need to learn from the mistake and fix their own problem. We are using the victim mentality; they are victims because they made a bad decision and did not have enough of a down payment to ride out the ups and downs of any investment. I have been buying and selling my homes over the years with money and "sweat equity", sometimes I won and other times I lost, but it was my responsibility. Why do we want the people who took a conservative approach to their home as an investment and are fiscally responsible and sustainable pay for others who did not? Also, if a bad thing happens to a good person, why do we have to bail them out? Let them learn the tough lessons, like we all have, and stop being the victim and avoid personal responsibility. Gary Peters is doing this to buy votes with our tax dollars; he is trying to scare everyone that their home investments will drop if we do not help this group. When he states all will profit from this deal, he forgets that the taxpayers paid for it and will not get a return. Fiscal responsibility that is sustainable in our personal, business and government entities. We are not victims; we are responsible for our actions.
Marty Rosalik June 17, 2012 at 05:31 PM
Daryl, gonn a cal you out on this one. Peters quote from article. "If the homeowner later sells the home for a profit, that profit is shared 50/50 with the lender," I see nothing to suggest that tax payers are funding this. It may be true but if the lender gets a share of any future "profit", this suggests private equity.
Herb Helzer June 19, 2012 at 11:00 PM
Forcing? What utter horsepuckey. Lenders were CLAMORING to extend subprime loans, competing ruthlessly for new business in a true "race to the bottom" where more and more of the traditional requirements to qualify for a mortgage were stripped away -- holding a good job, having strong or even middling credit scores, the 10% downpayment. Changing the law was what the BANKS wanted: They lobbied HARD for it in the 1990s and got it. I hesitate to ask you to remember history since you so clearly DON'T, but...from 1995 through 2006 Democrats were the MINORITY PARTY in Congress. Sen. Dodd and Rep. Franks had NO POWER to pass ANYTHING on their own when the groundwork for the Housing Bubble was set in place. The REPUBLICAN Majorities were required. You know, back when Bubba and Dubya were President. See, Government didn't force banks -- they did it to themselves, driven by sheer greed to charge 8%, 9%, even 12% interest on a home loan, taking full advantage of rising markets and the lack of financial savvy among many younger and first time borrowers. And for a while, borrowers didn't see it, as rising home values hid the impact of such high interest rates. "Home-flipping" was actually considered a career path, and every element of culture -- lenders, the media, a skewed tax code that gave deductions based on MORTGAGE INTEREST paid -- pushed people into buying far bigger homes than they needed. Bankers made the "housing mess," and have been deflecting blame ever since.
Herb Helzer June 19, 2012 at 11:17 PM
If it was 1999, then Republicans controlled both houses of Congress, and the "Progressives" did not control the agenda. Nothing could have passed only Democratic votes. That Bill Clinton signed the bill, in a time of budget surpluses and a roaring economy where we were on a clear path to eliminating the national debt, proved problematic. "Gaming the system" isn't just for supposed welfare cheats...banks and mortgage lenders took full advantage of every loophole and flaw and poured TRILLIONS of dollars into "investments" that in an earlier era would never have been made. By the way, I find it odd that people here bemoaning the repeal of Glass-Steagall are at the same time adamantly opposed to ANY aspect of Dodd-Frank, hate the Volcker rule and intentionally conflate TARP and the Stimulus of 2009. One would almost think you were crying crocodile tears with hypocritical concern trolling. But that couldn't be...right? Dodd-Frank is not perfect -- Republicans and Blue Dogs succeeded in watering it down before it passed, and once the GOP claimed the House they've been even more successful in preventing it from going into effect almost two years after it was signed into law. But it's much better than nothing -- which is exactly what we'll get with Willard "Mitt" Romney. No regulations, no controls, no limits on the power of banks. Certainly no return to Glass-Steagall.
Dee Kay June 20, 2012 at 01:08 AM
Just a little correction to the blaming of Barney Franks for the repeal of Glass-Steagall. It was pushed by the Fed and Greenspan, in cahoots with Sandy Weill of Travelers Ins. and John Reed of Citicorp, which after merger would become Citigroup Inc. Their proposal was taken by Phil Gramm-R of the Senate Banking Committee, refined further to help repay the banks for their $300 million "donations" over the prior 20 years, and America was officially turned over to the bankers. Franks can be blamed for a lot of things but repeal of G-S is not one of them. Banks are the real culprits here, arm in arm with politicians of both parties. The R party is well known for their stand on gutting regulations, spending more than dems., and borrowing to help that spending, while the D party is well known for taxing and overspending, and not truly forcing recipients to be accountable for their actions that caused them to need help. Both parties care more about themselves and their ideologies than they do the public or the country. We would be much less of a hate filled society if both parties ceased to exist. Think of how the financial crisis may have turned out if instead of bailing out the too big to fail banks, the homeowners were given a partial bailout instead. It would have been cheaper, whether the citizens deserved a bailout or not, because the TBTF banks sure didn't deserve to be bailed out and yet they were. Peters may be way off base but IMO it is worth at least a try.
Jim Sparks June 20, 2012 at 03:04 AM
Sorry, Daryl. Those who put 20% or more down on their houses and paid their mortgages on time every time can hardly be blamed for not being prescient enough to anticipate the decimation of the housing market, nor for being underwater on homes that lost 40% of their value almost overnight. They were merely following the template used for buying homes for the 50 years or so before the meltdown, and had every reason to believe that if they followed the rules, they'd have a safe investment on their hands. "Taxpayer" money? You mean, like the taxes they and everyone else paid into the system? It's about time that politicians see tax dollars for what they are - EVERYONE'S MONEY, and I see nothing wrong with trying to steer some of that back to the hard-working, responsible souls who truly are victims of circumstances beyond their control or future-view. It truly is sad to hear people with Ayn Rand sensibilities tell their neighbors and fellow citizens, "Too bad. I got mine - and you can go to hell".
Daryl Patrishkoff June 20, 2012 at 10:36 AM
Jim, Many people put down much more than 20% and still have taken a significant hit. It is called an investment and sometimes you win and sometimes you lose, why do we expect government to jump in and fix it? It is our tax dollars that pay for these things, we need to stop spending it on special groups and just provide the necessary services we all need with our tax dollars. Why do you believe government should pick winners and losers? When government picks winners and losers it is a political decision, not a logical fair one. It is our money they collect from us, then keep some to feed themselves and then distribute the rest of the money to their special group. To Marty's point, when Gary Peters or any other politician is involved they are spending tax dollars. Do not believe for a second that this does not use tax dollars for this special group. This has been tried several times over recent years and only a few get to participate due to the rules and regulations put in place by the government.
Marty Rosalik June 20, 2012 at 08:32 PM
Daryl, proof of the tax dollar involvement is better than a belief. I too believe that in some small font buried in the proposed legislation there is a clause to use tax dollars as a back up to "help the lender" help the borrower. But all I have is suspicion and a belief. However, still no proof. What I do see is that any profit from future sale is split with the lender. So where is the demonstrable tax payer involvement?
Larry Smith June 30, 2012 at 02:20 AM
MJ I see you are Herbie the philospher
Larry Smith June 30, 2012 at 02:22 AM
Dee Kay careful what you say Herbie is always right and we can dispute him
Herb Helzer June 30, 2012 at 11:32 AM
Aww, Larry, did I hurt your widdle feelings by calling out Patch trolls for their ill-considered, emotion-driven posts full of ad hominem and inaccurate history? Go cry, Emo Kid. If all you have to offer is passive-aggressive whining about how you can't find an echo chamber to sing the praises of something you may have posted under some entirely different article...then let these last posts of yours be your ineffectual legacy.
Larry Smith July 03, 2012 at 03:15 PM
Herbie you must sit around all day and the read the patch, you try to impress people with your unimpressive command of the English language. You cant hurt my feelings I listen to a lot of Herbie Heizers at work.
Haulin T Male July 03, 2012 at 06:13 PM
I have read all the comments, (why do people have to just start in on the person? side of it, why not just stay with the point, is that not just a form of Bullyism?) I think some young People who claim houses fell 40% over night, that Is true, a fact, they fell to where they should of been to start with. Some, say people got in, trusting the system that had proven as a good source to grow their monies.Now we start changing horses. I have to guess those people are under or around age 35 give or take 5. I call them the due me now generation. instant gratification types.The very group who Started "Flipping" Houses, House down 40%, means they are at 1999 - 2001 prices, which by the way is where they should be at. If as you say trust the system before. In Medical terms it is called a D & C street dusting & cleaning. A cleansing, it happens in the stock Markets all the time, called a Pull Back, in ecom's it is call a down turn or recession. Biggest Clue, for all you youngens, you heard it while at family gatherings, etc."Nothing in life is free " or if it sounds too good, It is". As A General statement , look all around you, are the older established owners, under water, (some on paper) from what they wanted on your block look at the age of under water & treading water.The older people new some thing was going to break, move into Homes with 0 down? never till 2000 have any one heard that even made Financial sense. Point fingers all you want, time will heal, live long enough.
mike smith July 04, 2012 at 02:23 AM
Larry without Herbie alias MJ we would not have to anything to laugh at, big words, no sense
herbert heizer July 04, 2012 at 02:50 AM
i just moved into Clawson and have read the replies of Herb I cant believe someone with a similiar name to me can be so ignorant with his writings
dave July 04, 2012 at 04:23 AM
Dave Leach So here is something to consider in responce to those that say people bought homes they couldn't afford. When I bought my home in 1998 I could afford it and continued being able to afford it for several years after. Then my now ex wife decided to file for divorce and of course the home had to go as I could now not afford it and neither could she when our incomes were split and she took half of mine. I was quite surprised to find out that what was a great deal in 1998 was now worth about twenty grand less then I payed for it in 1998 and after real estate commissions and the cost to put in a new furnace I was underwater on it at a time that I had next to nothing. So it was foreclosed. This is a very common theme give or take the divorce among many people I've met that have lost their homes. In effect what I'm saying is that everything was overpriced from around 1997 to the crash. If you bought a house then, any house whether you were stretching your limit or not and you didn't put a substantial downpayment on it you are/were underwater. And by substantial I mean I would have had to put forty percent down been able to sell it with no out of pocket of which I had no pockets left. This is my own story and its fairly relevant I believe to the situation. And I have to say that when all this happend the full effect of the housing crash hadn't fully hit the real estate market. After taking the house back the fixed it up and still got less than I paid years earlier.
dave July 04, 2012 at 04:35 AM
In regards to Glass Stegull, by the time it was repealed it had been watered down by interpretations that the only thing it was doing was stopping the smith barney, travelers, citicorp merger. All the problems that happened revolved around derivitives which were secured with suprime mortgages and then sold as moodys AAA rated investments. This was happening for years before the act was repealed as I said due to governing bodies creative interpretations of the law. There is a very good article on PBS's Frontline series from april that spells this out. Its a few parts but well written. www.pbs.org/wgbh/pages/frontline/money-power-wall-street/
dave July 04, 2012 at 04:59 AM
Herb, your statements about banks clamoring for loans at 12% is true but there is another angle to their motive. These banks were making more on the derivitive end of the mortgage bundling in synthetic default cdo etc... investments and needed more paper to issue these things through their investment sides where they were making huge returns on them until the first signs of true recession hit and everything started to cascade. And as a side note Mr. Peters idea sounds reasonable and how its going to burn tax dollars as some here have said is beyond me. I mean it doesn't seem to have any need of tax money to fund anything since there is no financial obligation by the government. I would lower the initial equity to a 100% though instead of 115%. It will be and easier sell to those that could be in a postion to keep their home and make the payments. I mean 100% with all other components the same I think would result in a better participation rate which would aggregate out to a better return for the banks as well increase its effectiveness.

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