For Immediate Release
July 23, 2008 |
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FOR MORE INFORMATION:
Cullen Schwarz
Office: 202.225.4961
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House Passes Bill to Combat Foreclosure Crisis |
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Package Will Allow Refinancing to Avoid Foreclosures and Provide Funds to Help Communities Buy Vacant Homes
Measure Will Also Provide Incentives to Domestic Automakers |
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(Washington D.C.)- In response to the nationwide economic downturn caused by the housing and credit crisis, the House of Representatives has approved major legislation to combat the unprecedented rise in foreclosures by helping struggling homeowners refinance their mortgages, and increase Community Development Block Grants to help local governments ease the negative impact of rising foreclosure rates on communities and the overall economy.
“The housing crisis is central to the economic turmoil we are now facing,” said Rep. Levin. “The federal government must come to the aid of struggling homeowners and support critical financial institutions in order to preserve opportunities for future homeowners. This legislation does both, and is particularly beneficial to Southeast Michigan, where foreclosure rates are among the highest in the nation.”
The package includes $3.9 billion in Community Development Block Grants to state and local governments to allow them to purchase foreclosed homes to alleviate the many problems associated with rising foreclosures, such as lower surrounding home values, maintenance costs, possible increased crime and lower property tax revenue. The Center for American Progress estimates that Michigan municipalities could receive around $160 million in direct funding, with communities in the 12th Congressional District receiving nearly $15 million.
“Earlier this year, I met with mayors and city managers of communities in my district, and they expressed an overwhelming need for federal action to alleviate this crisis,” said Rep. Levin. “Foreclosures not only affect those who lose their homes, they bring surrounding home values down for everyone. The rise in vacant homes also leads to lower revenue for our communities. This crisis affects us all, and the need for action could not be more critical. Additional Community Development Block Grants to help local governments purchase vacant homes will be of great benefit to Michigan communities.”
The legislation also includes a provision strongly supported by Rep. Levin to allow companies that are not currently profitable to participate in a business tax incentive that was unavailable to them as originally passed as part of the economic stimulus program earlier this year. Companies will be allowed to claim accumulated tax credits in place of a more favorable depreciation allowance when making capital investments this year. It is estimated that each of the Big Three automakers will benefit by as much as $30 million.
“It is only fair that these companies be rewarded for the investments they make under the economic stimulus program,” said Rep. Levin. “We encouraged companies to make capital investments this year that will help spur economic growth. But companies that do not expect to pay tax this year, in part due to the economic downturn, would receive no benefit regardless of how much they invest. This critical provision would correct that inequity for many companies, including our domestic automakers.”
According to RealtyTrac, Inc., Michigan’s foreclosure rate is the fifth highest in the country. Macomb and Oakland Counties’ foreclosure rates are currently second and fifth highest among all counties in Michigan, with Wayne County’s rate the highest. All three counties’ rates are in the top 4% among all counties in the nation. In 2007, the Detroit area had the highest foreclosure rate in the United States. Nationally, foreclosure filings are up 53% in the past year. (All data as of June, 2008, the most recent data available).
The housing package will help curb the rise in foreclosures by allowing the Federal Housing Administration to insure up to $300 billion in new loans to help borrowers at risk of foreclosure refinance into lower cost, fixed-rate mortgages. The bill also includes provisions to implement a plan to provide government backing of Fannie Mae and Freddie Mac in the eventuality such support is necessary, and to increase oversight of the two government sponsored enterprises.
Finally, the bill includes tax provisions that will help to stabilize and stimulate the housing market, including:
• A tax credit to help first-time homebuyers make a down payment on a home, encouraging home purchases
• A deduction of property taxes up to $500 ($1000 for married couples) for tax payers taking the standard deduction
• A temporary increase in the low-income housing tax credit to help create new options for families seeking affordable housing alternatives
• A provision authored by Rep. Levin to allow Federal Home Loan Banks to guarantee tax-exempt bonds, reducing municipalities’ borrowing costs for public projects including road repairs or school and hospital expansions
• An additional $10 billion in mortgage revenue bonding authority for 2008 to allow states to help struggling homeowners refinance their mortgages
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