New measures are being introduced by various states to counter the housing crisis across the country, which has affected more than 500,000 homeowners in Arizona alone.
A foreclosure settlement between the federal government, five major banks and 49 states is also aimed to reign in the crisis and punish the banks, but this settlement has faced criticism for allowing those responsible to avoid accountability by buying their way out of real penalties.
Arizona is one of several states that have introduced bills to allow state-owned banks to refinance mortgages that are worth more than the actual market price of the house at the time.
Some have called Arizona's bill revolutionary as it provides relief to those homeowners who are underwater--those who are making their mortgage payments but the amount they owe is more than the current market price of the property they own.
The bill would provide for a new body, the Arizona Housing Finance Reform Authority, to substitute the homeowner's current mortgage with a new one. The refinancing measures of the mortgage are reportedly such that in the end it would not cost the state anything; they are financed by floating revenue bonds derived from payments made by the homeowners, and the Arizona Home Insurance Fund would insure against any losses faced.
The Arizona Bill is facing skepticism as it goes against the law of contracts because losses are shifted to banks rather than being borne by those who have entered into the contract. However, the bill's supporters say the new measure would provide much needed relief to homeowners who are facing foreclosure in Arizona despite being current on their mortgage payments.
Even if the bill is passed in Arizona, homeowners may need other remedies such as Chapter 7 or Chapter 13 bankruptcy. By filing for personal bankruptcy under Chapter 7, foreclosure proceedings can be stayed automatically for a number of months. In addition to this, the added benefit for filers of Chapter 7 bankruptcy is the immediate relief from most debts.
Source: Huffington Post "New State Bank bills address credit and housing crisis," Ellen Brown, Feb. 27, 2012