Washington, DC – June 7, 2011 – (RealEstateRama) — Congressman Bill Posey (R-FL) was joined by 17 of his House colleagues in introducing legislation to aid economic recovery by preventing federal bank regulators from arbitrarily penalizing community banks for working with borrowers to modify their loans or accepting mortgage payments from someone other than the borrower. Since the 2008 financial crisis, federal bank regulators have been unnecessarily obstructing the ability of community banks to make and modify loans to small businesses and mortgage recipients.
“We’re trying to help homeowners, small business owners and our local community banks stay afloat,” said Congressman Posey, who serves on the House Financial Services Committee. “Common sense says if you are making your loan payments on time – including instances where your local bank has revised the terms of your loan – then regulators should not force banks to foreclose on property owners asking for a modification or consider your loan to be in non-accrual status. As long as payments are being made, your loan should be considered in good standing, particularly in this economy. My colleagues co-sponsoring this legislation represent Americans across the country, confirming that this is a national problem. That must be addressed.”
The Common Sense Economic Recovery Act of 2011 (H.R. 1723) would stop regulators from assigning of performing loans to non-accrual status, which can impair the bank’s financial health and choke ability to lend, and lead them to foreclose on borrowers. The legislation would treat any loan as a performing loan if it is 1) current, 2) no more than 30 days delinquent in last 6 months, 3) an amortizing loan, and 4) not funded through an interest reserve account. The bill also directs regulators to report to Congress ways to prevent contradictory guidance from the financial regulators. The bill would sunset two years after enactment.