Colorado Congressmen Ed Perlmutter and Mark Udall said a bill passed by the House on Tuesday could help homeowners facing soaring house payments as adjustable-rate mortgage rates rise.
“This helps individuals who got a subprime loan who otherwise would 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 a rise 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.
