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Foreclosure protection could have hidden risk

A House committee voted Tuesday to extend mortgage interest caps and foreclosure protection for activated service members despite warnings the move could make it more likely, not less, for someone to lose a home if they have financial problems.

The bill, HR 1315, the Veterans’ Benefits Improvement Act of 2007, includes a provision that would provide protection against foreclosure for 180 days after separation from the service and also would keep the 6 percent cap on mortgage interest promised under the Servicemembers Civil Relief Act for the same 180 days.

The House Veterans’ Affairs Committee passed by bill by voice vote as one of five measures it considered on Tuesday.

Currently, the 6 percent interest cap, which applies only for loans that began before military service, applies only for the period on active duty. Current law also provides 90 days of foreclosure protection after separation.

Rep. Stephanie Herseth Sandlin, D-S.D., said the 180 days of protection is a compromise from the initial proposal by Rep. Albert Wynn, D-Md., that asked for one year of foreclosure protection but did not extend the interest cap.

Herseth Sandlin said the 180-day period would give a service member who might have fallen behind on their mortgage while on duty time to get current on payments, to sell the home or to work out some other arrangement short of foreclosure.

However, mortgage lenders warned the committee that a six-month freeze on foreclosure could end up making things worse instead of better, because the longer a homeowner does not pay their mortgage, the harder it becomes to catch up.

Rep. John Boozman, D-Ark., called the bill a “fairly radical change,” and tried — but failed — to limit the foreclosure protection to just three months. “These things do have consequences,” Boozman said. “My concern is in trying to do something good we may be hurting them, not helping them.”

The benefits bill includes a small change in a current adaptive housing grant program that allows a disabled service member temporarily living in the home of a family member to receive a grant of up to $14,000 to modify a home to meet special needs for severe service-related disabilities. It also creates a scholarship program to encourage college students to get degrees and certificates in blind rehabilitation.