Press Releases

Senator Feinstein Co-Sponsors Bills to Help Financially Strapped American Homeowners Avoid Foreclosure

-Legislation would give at-risk Americans the tools they need to save their homes-

Washington, DC – U.S. Senator Dianne Feinstein (D-Calif.) announced today that she has signed on as a co-sponsor of two bills designed to provide relief to hundreds of thousands of Americans at risk of losing their homes to foreclosure. 

  • The Foreclosure Prevention Act would provide federal funds for foreclosure counseling, and funds to distressed communities for purchase and rehabilitation of foreclosed homes to prevent neighborhoods from becoming blighted areas. The bill was introduced Wednesday by Senate Majority Leader Harry Reid (D-NV).
  • The Helping Families Save Their Homes in Bankruptcy Act would modernize the bankruptcy code so that homeowners can take steps to keep their homes from going into foreclosure. The bill was introduced by Senator Richard Durbin (D-IL) on October 3, 2007. 

“Americans are hurting. They are up to their necks in debt, and at risk of losing their greatest asset – their homes,” Senator Feinstein said. 

“These Americans need help, and they need it now. But there isn’t enough federal help – and our federal laws are outdated and inadequate. These bills will change that. 

“The Foreclosure Prevention Act will provide vital resources to people facing foreclosure, and to keep communities that have been hit hard by this crisis from going into decline. 

“The Helping Families Save Their Homes in Bankruptcy Act will modernize our bankruptcy code to allow people to restructure their home mortgages.  Instead of losing their homes to foreclosure, Americans who can keep up with the payments on a restructured, fixed-rate mortgage will be able to keep their homes.  This will bring much-needed relief to more than 638,000 American families.” 


The sub-prime lending crisis has had a profound impact on American homeownership. Last year, more than 2.2 million American homes went into foreclosure, a jump of 75 percent over 2006, according to RealtyTrac. In the next two years, another 1.8 million American homes will be in danger of foreclosure as adjustable-rate mortgages reset to higher levels. 

California has been especially hard hit: 

  • California led the nation in total foreclosure filings and the number of homes in some stage of foreclosure last year, according to RealtyTrac. There were 481,392 filings issued on 249,513 properties last year, more than three times the filings in 2006. Overall, 1.9 percent of all California homes entered some stage of foreclosure last year; 
  • In California, default notices – the initial step in the foreclosure process – rose to 254,824 in 2007, a 143 percent increase over 2006, according to DataQuick Information Systems;
  • Five of the 10 metropolitan areas with the highest foreclosure rates in the nation are in California, according to RealtyTrac. 

Despite these trends, America’s bankruptcy code has not kept pace with today’s complex mortgage-lending environment. Bankruptcy law currently allows people to restructure most forms of personal debt. But it does not allow people to restructure the mortgages on their primary residence. 

The Helping Families Save Their Homes in Bankruptcy Act would not alter recent changes to the bankruptcy law. Instead, it would eliminate an exception – which prevents people in bankruptcy from restructuring the mortgage on their primary residence -- that dates to 1978. At that time, most mortgages were 30-year fixed-rate loans – vastly different from the exotic sub-prime mortgages of today. 

Key provisions of the Foreclosure Prevention Act: 

  • Provides $200 million in funding for foreclosure prevention counseling;
  • Provides $4 billion in Community Development Block Grants (CDBG) to allow localities to purchase and rehabilitate foreclosed properties;
  • Requires that the maximum loan payment on a mortgage be disclosed at the time of application;
  • Increases the cap that applies to bond issuances by housing finance agencies.  This would provide more funds to housing finance agencies in order to refinance subprime mortgages. 

Key provisions of the Helping Families Save Their Homes in Bankruptcy Act:

  • Eliminates a 1978 provision of the bankruptcy code that prohibits homeowners from restructuring their mortgages on their primary residence, if the debtors meet strict income and expense criteria;
  • Allows borrowers up to 30 years from the original loan date to repay their mortgages, at a new fixed interest rate;
  • Waives the requirement for bankruptcy counseling for families whose homes are scheduled for foreclosure sale, so they will have more time to fight to save their homes;
  • Requires lenders assessing fees to provide notice at least 60 days before the conclusion of the bankruptcy case, and allows judges to waive penalties for prepayment of mortgage debt;
  • Allows homeowners over age 55 to exempt up to $75,000 of the value of their homes – instead of the standard $15,000 – from being used to pay creditors in bankruptcy;
  • Reinforces that bankruptcy judges, not arbitrators, can rule on core issues;
  • Reinforces that consumer protection claims are still available in bankruptcy. 

The Helping Families Save Their Homes in Bankruptcy Act is supported by AARP, the AFL-CIO, Consumer Federation of America, Consumers Union, NAACP, National Association of Consumer Bankruptcy Attorneys, National Council of La Raza, National Fair Housing Alliance, National Urban League, and SEIU.