“We’re moving forward to consider a housing package that could provide relief,” Salazar said.
Salazar took time away from discussing S. 2636, the Foreclosure Prevention Act of 2008, on Capitol Hill to talk with the media about the Senate’s move to consider the bill. The Act’s provisions were being discussed Wednesday, said Salazar, and he hopes it will pass in the next few days.
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In response to a question from the Daily Press, he said there are several important roles in regard to the bill at the state level.
Included in the bill, said Salazar, is $200 million for credit counseling which includes programs already in place such as the foreclosure hotline.
He told the Daily Press that the hotline has already responded to close to 30,000 calls and additional resources in Colorado will be significant.
The hotline is a free service to Colorado homeowners who have questions about their home loans, according to the Colorado Division of Housing. People who are having trouble making payments, or who know they may miss payments, are encouraged to call the number (1-977-601-HOPE).
Another important role the state plays in the bill is the $10 billion distributed nationally in revenue bonds (also called private activity bonds) the bill proposes, which will be handled at the state and local government levels, Salazar said.
“They’ll be issued by organizations such as the Colorado Housing and Finance Authority (Chfa),” he said.
Organizations like Chfa are allocated federal money through the state, depending of population, said Scott Aker, manager of Chfa’s Western Slope office in Grand Junction. Typically Chfa is allocated about $100 million. The organization then purchases loans from participating lenders across Colorado.
The bill could allocate more to organizations like Chfa and open the doors wider to help not only first-time home buyers with loans as Chfa currently does, but also help with refinancing.
This move would allow the company to “reach out more” and get people into a more stable mortgages, said Jerilynn Martinez, Chfa’s legislative and media liaison.
One provision Salazar said he is interested in, because it has worked in the past, is providing a tax credit for people who buy homes in foreclosure, specifying it would be a limited tax credit for first-time home buyers.
By providing a tax credit of about $5,000 a year and making it renewable up to two years, it would encourage potential buyers to look into the foreclosure market, thus resulting in fewer foreclosures on the market. These numbers are still under consideration, as is the whole bill. However, Salazar said he hopes the tax credit will be included in the bill or added as an amendment.
As foreclosed homes sit on the market, their neighboring homes depreciate in value. In Colorado, 75,000 homes have suffered significant decline in values. Overall, this has cost Colorado homeowners about $3.2 billion, he said.
“That provision is still in the process,” he said. “We need to make sure foreclosure circumstances are not a haven for foreclosure speculators.”
Other provisions the bill includes would be incentives which would push lenders to sit down with troubled home buyers and restructure or renegotiate their lending documents.
“There are lenders willing to renegotiate and are in fact doing it,” Salazar said. “That is part of what we are doing in Colorado ... providing counseling assistance that brings those two together.”
Changing the bankruptcy code to include first-time homeowners in foreclosure is also included in the bill. However, it is limited to changes only for those in adjustable-rate mortgages who pass the IRS “strict means test.” Salazar said having this option may also be an incentive for lenders to work with the borrowers.
Salazar said there will most likely be other amendments as the bill moves forward.
Contact Kati O’Hare via e-mail at katio@montrosepress.com
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