Foreclosure bill HR 5818 passed by House Financial Services Committee

The House Financial Services Committee passed the Neighborhood Stabilization Act of 2008 (HR 5818), which would establish a $15 billion HUD loan and grant program for states to purchase and rehabilitate vacant, foreclosed homes for resale or rental.

HR 5818 proposes $7.5 billion in non-recourse, zero-interest loans to states to finance acquisition and rehabilitation costs. The loans would have to be repaid within two years for homeownership properties and five years for rental properties with 20 percent of appreciation at resale being paid back to the federal government. The bill also proposes $7.5 billion in grants to states to cover operating costs while the property is being stabilized. Each state's loan and grant would be based on the state's percentage of nationwide foreclosures over the last four calendar quarters, adjusted for the state's relative median home price. States would be able to use government entities, such as housing authorities, to purchase, rehabilitate, and sell/rent these properties. Homes purchased for resale would be required to be sold to families having incomes not exceeding 140 percent of area median income (AMI).

Properties purchased for rental would be required to serve families having incomes at or below AMI. Lastly, the bill would provide eviction protections to tenants in foreclosed properties.

HR 5818 is expected to be considered by the full House in the coming weeks. For a copy of the bill, please click here.