DENVER—Colorado Congressmen Ed Perlmutter and Mark Udall said a bill passed by the House Tuesday could help homeowners facing soaring house payments as adjustable-rate mortgage rates rise.
“This helps individuals who would otherwise got a subprime loan who have hit a trigger that would bump the interest rate higher,” Perlmutter said Tuesday.
The bill, which passed the House 348-72, would expand the role of the Federal Housing Administration, which insures mortgages for low- and middle-income borrowers.
It would allow the FHA to back refinanced loans for tens of thousands of borrowers who are facing higher house payments because their mortgages are resetting to sharply higher rates from low initial “teaser” levels.
“I know that people have been attracted to subprime mortgages but they have a lot of fine print,” Udall said.
Udall said a United Airlines employee he met at an airport asked him for help because the 5 percent interest rate on her mortgage was about to nearly double to about 9 percent.
“It’s (the bill) not a silver bullet, there’s more work to be done but this will have a very significant impact in Colorado,” Udall said.
Udall and Perlmutter, both Democrats, spoke to reporters in a conference call before the bill won final passage in the House. Udall is running for a U.S. Senate seat next year.
The bill is Congress’ first stand-alone measure to deal with a credit crunch caused by companies spooked by the subprime mortgage meltdown and an increase in foreclosures.
Udall and Perlmutter said the bill would also help people struggling to sell their houses find buyers who could get a government-backed loan.
Udall also sees the move as a long-term solution.
“We’re also sending a signal to consumers and into the market that we’re responding,” Udall said. “Part of this (the credit crunch) is tied in to psychology.”
The bill goes next to the Senate. It exceeds limits favored by the Bush administration.
Perlmutter said another bill making its way through the House would help those who have fallen behind on their house payments and forced into bankruptcy keep their homes. As proposed, home owners would be able tack on the delinquent payments onto the end of a loan, keeping the monthly payment the same but extending the term of the loan by a year or two.
Irvine, Calif. based RealtyTrac Inc. released figures Tuesday that ranked Colorado eighth in the nation in the number of foreclosures filed last month. Nationwide, 243,947 foreclosure filings were reported in August, up 115 percent from 113,300 in the same month a year ago for a rate of one filing for every 510 households.
Colorado officials have cautioned that the RealtyTrac numbers are higher than state statistics, which also show a growing problem. The Colorado Housing Division said home foreclosure filings during the first half of this year totaled 19,460 and were on pace to rise 34 percent above last year’s record 28,435.
The percentage of homes sold at auction to satisfy the mortgages also has increased from a historic average of around 50 percent to 61 percent, according to state figures.
