Draft Of Financial Recovery Act Promises Foreclosure Relief

The current draft of the governments’ financial recovery act, formally the “Emergency Economic Stabilization Act of 2008" contains several provisions designed to help homeowner prevent foreclosure. The terms of the Act, being referred to as "the bailout bill", are drafted in general, unspecific terms, and certainly there will be many government regulations needed to implement the new law before any agency can actually provide foreclosure relief. The foreclosure relief provisions are found in Sections 109 and 110 of the recovery package.

Section 109 of the bailout plan states that the Secretary of Treasury shall implement a plan that seeks to maximize assistance for homeowners and to encourage mortgage servicers to take advantage of the HOPE Program under the National Housing Act or other available programs to minimize foreclosures. In addition, the Secretary may use loan guarantees and credit enhancements to facilitate loan modifications to prevent avoidable foreclosures. The new law directs the Treasury Department to coordinate with out government agencies to identify opportunities for the acquisition of classes of troubled assets that will improve the ability of the Secretary to improve the loan modification and restructuring process and to permit bona fide tenants to remain in their homes under the terms of their leases.

Section 110 of the bailout bill states that Federal managers of mortgages on residential real estate, including multi-family housing, shall implement a plan that seeks to maximize assistance for homeowners and to encourage mortgage services to minimize foreclosures.

The financial recovery law leaves the details of implementation to be worked out in future federal regulations. Considering the time it normally takes to implement federal regulations, the new law does not deliver immediate relief to people facing foreclosure today. The mortgage lending industry will see relief long before benefits reach homeowners. It will be difficult to find regulations that fairly provide foreclosure relief to deserving homeowners without creating new avenues for abuse through manipulation of benefits provided by this law.

published by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida