Washington, D.C. – Congresswoman Lucille Roybal-Allard (CA-34) applauds the final enactment of sweeping legislation aimed at responding to the American mortgage crisis. 

The American Housing Rescue and Foreclosure Prevention Act will help families keep their homes, aid local communities hit hard by the foreclosure crisis, and begin to stabilize the economy and financial markets.  With the congresswoman’s support, the measure passed the U.S. House of Representatives on July 23 and was signed into law on July 30. 

“While the American Housing Rescue and Foreclosure Prevention Act will not solve all of our nation’s economic problems, it is an important step taken by Congress to address the serious needs of homeowners in the 34^th Congressional District and throughout our country,” said Congresswoman Lucille Roybal-Allard, who hosted a July 19 foreclosure prevention workshop in her district that was attended by more than 500 people.

The American Housing Rescue and Foreclosure Prevention Act will help hard-working families in danger of losing their homes to refinance into lower-cost government-backed mortgages with easier repayment options. The bill also provides an additional $4 billion in Community Development Block Grant funds to allow cities and states to buy up and rehabilitate foreclosed properties that are driving down current home prices, reducing state and local revenues, and de-stabilizing neighborhoods.

“The foreclosure crisis is being felt by families all over the nation,” Congresswoman Roybal-Allard said. “Almost a half-million Americans have lost their homes to foreclosure in the first half of this year, nearly double the rate from the same time a year ago.  California – with the nation’s second highest foreclosure rate – has been hit especially hard.  Passage into law of the American Housing Rescue and Foreclosure Prevention Act will help our communities face and overcome this national financial crisis.”

Starting October 1, under the new law, homeowners struggling to make payments on high-interest mortgages can convert their loans to government-backed, 30-year fixed rate mortgages. Homeowners interested in taking advantage of this three-year program are encouraged to contact their banks now to begin the process.  This provision is expected to assist about 400,000 homeowners facing possible foreclosure.

Homeowners in need of assistance are also encouraged to take advantage of the $180 million allocated under the measure for pre-foreclosure financial counseling and legal services. 

In addition, the American Housing Rescue and Foreclosure Prevention Act offers $15 billion in housing tax benefits to encourage families to purchase homes.  Under the measure, any first-time homeowner who purchased a home between April 9, 2008 and July 1, 2009, will receive up to $7,500 in refundable federal income tax credits.  The credits work as an interest-free loan to be paid back over 15 years.  In addition, all homeowners who do not itemize their income taxes will be able to deduct $500 to $1,000 from their 2008 federal taxes.

For homeowners who live in more expensive areas such as Los Angeles where the average cost of a home is far above the national average, the legislation also increases the loan limit for Fannie Mae and Freddie Mac government-backed loans from $417,000 to $625,500.