Legislation that would, among other things, further regulate the mortgage lending industry and provide relief to struggling homeowners has been proposed in both the Statehouse and U.S. Capitol. But so far, only a handful of steps have been put into action to deal with the situation.
"This is the issue that should be on the top of everyone's agenda," said state Sen. Jeffrey Klein, D-Bronx, who has been among the biggest proponents of legislation to address the crisis. "This is it. Even if you don't have a subprime mortgage, even if your house is not ready to be foreclosed upon, we are already seeing an impact on the financial markets."
Those shaky financial markets and an ominous surge in home foreclosures prompted President Bush to announce a series of moves. Chief among them was a change in Federal Housing Administration policy allowing additional low-income homeowners access to government-sponsored mortgage insurance.
"It's not the government's job to bail out speculators or those who made the decision to buy a home they knew they could never afford," Bush said at the time. "Yet there are many American homeowners who can get through this difficult time with a little flexibility from their lenders or little help from their government."
Bush's announcement, which came after critics had accused his administration of ignoring the problem, was welcomed on both sides of the political aisle as a good first step. But it was followed by calls for additional action, especially from Democrats in Congress.
"The federal government has an inherent responsibility to protect homeowners from losing their homes as a result of deceptive marketing," Sen. Charles Schumer, D-N.Y., said. "We need to offer immediate assistance to endangered homeowners in the Hudson Valley and across the country while keeping an eye towards the future and working to reign in unscrupulous lenders."
Schumer, chairman of both the Joint Economic Committee and the Senate's housing subcommittee, has been among the most active lawmakers in pushing congressional action to stem the crisis's impacts and prevent it from happening again.
On Dec. 6, the Bush administration announced another step, a deal with the mortgage industry for a five-year freeze on interest rates on some adjustable-rate subprime mortgages starting Jan. 1.
Schumer and other senators attached an item to a transportation spending bill that provided $200 million in funding to nonprofit agencies that provide counseling to people at risk of foreclosure. The measure could go to the president this week.
Schumer and other lawmakers, including Rep. Barney Frank, D-Mass., are also pushing legislation known as the Promise Act, which raises by about 10 percent the total dollar value of mortgages that Fannie Mae and Freddie Mac - the two federally chartered housing finance companies - are allowed to hold in their portfolios.
By doing so, lawmakers hope to make it easier for struggling homeowners to refinance. Lenders are wary of allowing homeowners with spotty credit to refinance unless they are confident that they can sell those loans to Fannie Mae or Freddie Mac.
The Bush administration, however, opposes raising the portfolio limits for Fannie and Freddie.
Another measure pending in the Senate is the Borrowers Protection Act, which seeks to regulate the actions of mortgage brokers. Among its provisions is a requirement for mortgage brokers to verify the ability of borrowers to pay back their loans before approving the mortgage.
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