'No end in sight' to crisis

Sen. Salazar touts $14 billion measure against foreclosures

By John Rebchook, Rocky Mountain News (Contact)

Published February 23, 2008 at 12:05 a.m.

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Photo by Ken Papaleo / The Rocky

Salazar's shadow, left, appears on the wall during a news conference at Brothers Redevelopment Inc.'s headquarters.

Photo by Ken Papaleo / The Rocky

Kait Thompson answers questions about foreclosures Friday. At right, U.S. Sen. Ken Salazar, D-Colo., tours the headquarters of the nonprofit Brothers Redevelopment Inc.

Photo by Ken Papaleo / The Rocky

Salazar's shadow, left, appears on the wall during a news conference at Brothers Redevelopment Inc.'s headquarters.

Photo by Ken Papaleo / The Rocky

Kait Thompson answers questions about foreclosures Friday. At right, U.S. Sen. Ken Salazar, D-Colo., tours the headquarters of the nonprofit Brothers Redevelopment Inc.

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U.S. Sen. Ken Salazar, D-Colo., urged Congress on Friday to take action on a bill that would earmark more than $14 billion to combat the foreclosure crisis sweeping Colorado and the rest of the nation.

Speaking at the Edgewater headquarters of the nonprofit Brothers Redevelopment Inc., where he later listened to housing counselors with the Colorado Foreclosure Hotline, Salazar said that the nation is suffering from the worst housing market since the Great Depression.

He said home prices could fall 15 percent to 16 percent before the slump is over and noted that housing starts are down 60 percent.

"The reality is there is no end in sight," he said.

"The new-home construction business could essentially shut down," which would have huge economic ramifications.

The Colorado Division of Housing recently reported that foreclosure filings shot up 40 percent last year to 39,915 from the previous record of 28,435 in 2006.

"This affects every homeowner in the state of Colorado, whether your home is in foreclosure or not," Salazar said. "It's the painful part of the American dream of homeownership."

He said that the Senate is expected to consider the Foreclosure Prevention Act of 2008 on Wednesday. He is co-sponsoring the measure.

The legislation would modify the use of mortgage-revenue bonds so that $10 billion could be used for homeowners facing foreclosure.

It also would earmark $4 billion for Community Block Grant groups to buy and rehabilitate foreclosed properties, as well as $200 million for housing counselor resources.

The most controversial part of the bill would change the bankruptcy code to allow judges to modify mortgage debt for some homeowners.

Generally, the lending industry supports most of the points in the bill, other than the bankruptcy portion, said Chris Holbert, president of the Colorado Mortgage Lenders Association. The group has not taken a position on the bill, he said.

"Allowing bankruptcy courts to open up existing contracts and renegotiating those contracts," could result in higher interest rates for all consumers, Holbert said.

He said investors will be less likely to invest in mortgage-backed securities if interest rates can be changed in bankruptcy court.

Salazar countered that people in bankruptcy would have to meet stiff requirements to have their mortgages modified.

Bankruptcy court judges already can do that for second homes and investment properties.

Holbert said that increasingly, the industry voluntarily is allowing homeowners in trouble to refinance into lower rates to prevent foreclosures. But he said that is something lenders should decide, not bankruptcy court judges.

rebchookj@RockyMountainNews.com or 303-954-5207

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