In the early weeks of May 2008, the House is to review the American Housing Rescue and Foreclosure Prevention Act. This bill will amend the Senate-passed H.R. 3221 (As amended by the Senate).

All parties, be it lenders or homeowners and any one participating and affected by our economy is going to deal with hardship when a foreclosure, or a series of foreclosures, takes place. The House will discuss and analyze a rescue plan which promises future productivity in order to respond to the current crisis middle class Americans are starting to face while also providing new tools to prevent a crisis of this magnitude from happening again. Keeping the FHA up to today’s standards and re-examining the GSEs will in turn give liquidity to the current status of our mortgage markets and also provide oversight in our near future. The bipartisan supported measures are going to start to fix our economy, restore the now low confidence in markets, put a limit to the damage it inflicts on neighborhoods and it help build much more affordable housing from here on out.

Title I - The FHA Housing Stabilization and Homeownership Retention Act. This will begin a voluntary FHA program which will give mortgage refinancing assistance allowing families to keep their houses, strengthen neighborhoods and find a solution to stabilize the housing market.

  • Program. If a substantial writedown request for the mortgages is agreed to by the most current lender, the FHA lender then pays off, in full, the current lender as well as issuing the borrower a lower priced FHA-insured mortgage.
  • Profit Sharing. In order to aid in covering government costs and improper enrichment, it requires the borrower to share a large portion of collected profits with the government for either selling or refinancing the home.
  • No Speculators. The only types of owners who qualify for the program are owner-occupied primary residences and it protects those who have been subject of mortgage fraud by strengthening the exclusion of those who have committed fraud.
  • Risk Reduction. In order to protect to the government:
    • Higher fees will be charged to establish a loss reserve;
    • Monthly payments will be reduced from the new FHA loan, in turn reducing risk of foreclosure; and
    • Borrowers willing to take more of a risk must make the first 6 months of the new rate payments before closing out the new FHA mortgage.
  • Sunset. This program will expire its use in 2 years time with possible 6-month extensions that must not exceed 2 years.
  • Addition Provisions. Creates an Office of Housing Counseling within HUD and gives authorization to additional FBI and DOJ funds to battle against mortgage fraud.

Title II - FHA Modernization

  • Loan Limits. The temporary FHA loan limit increase from the economic stimulus bill are made permanent which sets FHA limits either lower of (a) 125% of the local area median home price, or (b) 175% of the nationwide GSE conforming limit.
  • Fee Protections for lower income and lower credit borrowers. Provides directions to HUD to serve borrowers a higher credit risk, jumps up fees to handle additional risk, as well as offers for a return if the borrow keeps a healthy cycle of 5 years of on-time payments.
  • Reverse Mortgages. The FHA reverse mortgage loan will increase in size by approving a nationwide loan limit equal to 132% of the GSE conforming loan limit; placing caps and lowering loan starting fees and offering consumer protections.
  • FHA Personal Property Manufactured Home Loans. Brings life back to the FHA manufactured loan program specifically for personal property manufactured homes.
  • FHA Condo and Manufactured Home Loans. Implements changes to certain guidelines to make loans more lenient, while holding strong to basic underwriting protections.
  • Maximum FHA Loan Term. Lengthens the maximum limit FHA term from 35 to 40 years
  • Integrity of Appraisals. Enhances the protection against inflated appraisals, and enforces penalties to those who unfairly attempt to influence appraisal values.
  • Borrowers Lacking Sufficient Credit History. Introduces a starter program for borrowers who are credit worthy but have no established credit in the normal reporting process.
  • Down Payment Simplification. Makes the calculation of the basic FHA down payment much easier as it preserves the most recent FHA loan to value levels.
  • Foreclosed FHA Multifamily Properties. Keeps the affordability of Multifamily properties, by making sure FHA is correct in their appraisals which reflect the amount it takes to rehabilitate the units.

Title III - Government Sponsored Enterprise (GSE) Reform. Includes the House-passed bill to reform prudential and mission oversight of Fannie Mae, Freddie Mac, and the 12 Federal Home Loan Banks (the “GSEs”).

  • Strong Independent Regulator. Makes GSEs respond only to a single independent regulator with a great amount of safety and soundness powers, which consist of conservatorship as well as receivership authority.
  • Enhanced Housing Mission. Strengthens the Freddie Mac and Fannie Mae housing project by improving in selecting of their better priced housing goals and responsibilities in lower level markets.
  • New Affordable Housing Fund. Creates a revised affordable housing fund designed in the model of the Affordable Housing Programs of the Federal Home Loan Banks.
  • Increased Loan Limits. Per the Economic Stimulus Act of 2008 this will permanently increase conforming loan limits. Limits in high cost areas will be set at 125% of the local area median while being capped at 175% at the national median. Areas are not based on national prices.

Title IV - Castle/Kanjorski Facilitation of Loan Modifications. HR 5579, The Emergency Loan Modification Act of 2008, adopted by the Financial Services Committee on April 23, 2008

  • Gives clarity for all servicers, only applicable with already established servicing contracts and referencing their duties about loan modifications for troubled mortgages.
  • Gives full protection from investor driven lawsuits to all services who establish specific long-term loan modifications.
  • Encourages the use of loan modifications to help families keep their homes.
  • No limit to loan mitigation efforts from servicers, and enables borrowers to pursue any claim with lenders, servicers, or other parties involved in the mortgage process

Title V - Miscellaneous Housing Provision.

  • Protection for Disabled Veterans facing Bankruptcy from Discrimination. Guarantees that a mortgage loan program cannot be denied to a disabled veteran and the benefits of program because of bankruptcy. The Bankruptcy Code is in place to prevent all forms of discrimination including but not limited to a denial of Student Grant, Loan Guarantee, Loan, or Loan Insurance
  • Investments in Public Welfare. Like the pre-2006 standard for eligible types of affordable housing economic development investments, this bill widens the types of public welfare investments for national and state member banks. Public welfare investments can now be up to 15 percent of their capital and surplus through the authority of thrift grants.

Amendment 3

Brad Miller-LaTourette Amendment

  • In order to prevent wrongful foreclosure practices as well as implement rules concerning the foreclosure process the act strengthens the rights to states. The National Bank Act and the Home Owner’s Loan Act also do not preempt state laws regarding any residential real property foreclosure as well as the treatment of any foreclosed property.