1851 Center Advises House Committee Modifying Mortgage Contracts Unconstitutional
COLUMBUS - The Buckeye Institute's 1851 Center for
Constitutional Law today advised members of an Ohio House committee
that passage of HB 3, the "Home Foreclosure Prevention
Act," would violate the Ohio Constitution, raise interest
rates on home loans, and be the subject of a legal
challenge.
Speaking before the Ohio House Housing and Urban Revitalization Committee, 1851 Center Director Maurice Thompson questioned the legislation's loan modification provisions. The bill authorizes judges to rewrite existing mortgage agreements, and authorizes the Ohio Department of Commerce to implement loan modification programs.
"Although the sponsors of this bill have expressed the intent to rescue homeowners who are currently in foreclosure or risk thereof, it is clearly unconstitutional to interfere with existing mortgage agreements in Ohio," Thompson said. "Any provision authorizing Common Pleas judges or the Ohio Department of Commerce to modify existing mortgage contracts will be stricken from HB 3 upon legal challenge. This will not only negate assistance for current homeowners, but it will leave the statute applying only to prospective mortgage contracts."
"As applied to these prospective mortgages, HB 3 would clearly raise interest rates for prospective homeowners, thus harming more Ohioans than it would help, and enhancing the likelihood of increased delinquencies," Thompson added.
Specifically, HB 3 empowers Common Pleas judges to reduce the principal amount and/or interest rate of the loan. In addition, the measure empowers the Ohio Department of Commerce to"
- Reduce the interest rate on a home loan;
- Extend the period over which a homeowner may repay a home loan;
- Defer the amount of principal due on a home loan;
- Reduce the principal due on a home loan; and
- Utilize "other factors that the director determines are appropriate."
Thompson's complete testimony is available online at www.buckeyeinstitute.org.
The Buckeye Institute for Public Policy Solutions, together with its 1851 Center for Constitutional Law, is a nonpartisan research and educational institute devoted to individual liberty, economic freedom, personal responsibility and limited government in Ohio.
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