Yesterday we joined together – a Congressman from rural New Hampshire and a Congresswoman from urban Milwaukee, Wisconsin – to introduce legislation that would help protect homebuyers from risky loan practices.
Our Homebuyers Protection Act has two parts – one that would require subprime loans to have an escrow account – just like prime loans do – so that subprime borrowers aren’t sacked with a huge tax bill at the end of the year. Instead consumers would pay taxes and utility bills on a monthly basis using an escrow account. These huge tax bills often can contribute to early foreclosures because a borrower will fall behind financially when hit with these bills at the end of the year.
The second part of the bill would require a licensed appraiser to appraise all residential homes when consumers seek a mortgage. This would help to prevent faulty appraisals that often contribute to higher homeowner taxes. This would also provide assurance to the secondary mortgage market that the home – the asset that backs the loan – is properly appraised.
The number of home foreclosures is surging and creating an incredibly traumatic effect on families in our communities. The safeguards that we propose would protect our consumers, but would also benefit the secondary market and our economy.
This bill would help protect folks from questionable loan practices and enforce their rights as consumers. As members of the Financial Services Committee, we are working to put the interests of homebuyers first.