The top members of the Senate Banking Committee reached agreement Monday on legislation intended to help the ailing housing market and impose tougher rules on mortgage-finance giants Fannie Mae and Freddie Mac.
WASHINGTON, DC 5/19/2008 – Senator Chris Dodd (D-CT) and Senator Richard Shelby (R-AL), Chairman and Ranking Member of the Senate Committee on Banking, Housing, and Urban Affairs, today announced they have reached an agreement on legislation that the Committee will consider tomorrow, “The Federal Housing Finance Regulatory Reform Act of 2008,” which includes major efforts to help prevent the rising number of foreclosures, to create more affordable housing for Americans, and to reform the regulation of the government-sponsored enterprises (GSEs) in order to improve their role in the housing finance system.
UPDATE! 5/20/2008 - NEW YORK (CNNMoney.com) -- The Senate Banking Committee on Tuesday voted 19-2 to pass a housing bill that the panel's leader hopes could be signed into law by July.
The package includes both a proposal for a new regulator for Fannie Mae, Freddie Mac and the Federal Home Loan Banks and funding for Federal Housing Administration refinancings of at-risk mortgages, similar to a House-passed package. This Federal Housing Finance Agency would have more power and flexibility to set capital requirements for those government-sponsored entities (GSEs).
The Senate bill, titled the “Federal Housing Finance Regulatory Reform Act of 2008,” is nearly 400 pages long and is broken into five titles.
- The first three deal with the creation of the new GSE regulator,
- the fourth calls for up to $400 billion in funding for mortgage refinancings through the Federal Housing Administration,
- and the fifth calls for a study of fees charged by the GSEs.
Senate Banking Chairman Chris Dodd, D-Conn., and Ranking Member Richard Shelby, R-Ala., went into last Thursday’s mark-up with still-unresolved differences over GSE reform provisions, including those dealing with the new regulator’s authority to limit portfolio growth at Fannie and Freddie and to change minimum capital requirements.
Are you ready for the onslaught of refinances this legislation could bring?
The Senate's bill aims to prevent more foreclosures and create more affordable housing, and it would result in a new regulator overseeing both Fannie and Freddie. Faced with the struggling housing market, senators have been negotiating for weeks over the form of a new bill. The House has passed a similar version, which would allow the Federal Housing Administration to insure up to $300 billion in refinanced mortgages.
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The Senate's bill "addresses the root of our current economic problems -- the foreclosure crisis -- by creating a voluntary initiative at no estimated cost to taxpayers which will help Americans keep their homes," said committee Chairman Christopher Dodd, D-Conn.
The panel's top Republican, Richard Shelby of Alabama, said he's satisfied the bill protects the U.S. taxpayer. Members of the committee are scheduled to meet at 10 a.m. on Tuesday to consider the bill.
Despite opposition from the Administration, it looks as though the Senate is going to hammer out an agreement to allow FHA to refinance “short” mortgages. And Senate Republicans are working with the White House to make sure the previous threat of veto is removed.
Along with the previously announced expansion of the FHA Secure refinance program that is effective on July 14, this is sure spark a refinance boom. FHA is implementing Risk Based Pricing on the same date—so the world is changing very quickly.
According to a recent National Low Income Housing Coalition [NLIHC] article:
WASHINGTON, DC - Responding to pressure from Ranking Member Senator Richard Shelby (R-AL), the Senate Banking, Housing, and Urban Affairs Committee appears to be on the verge of diverting funds designated for a housing trust fund for housing for the poorest Americans to pay for Committee Chairman Christopher Dodd’s (D-CT) new program to refinance homeowners facing foreclosure.
In his bill “The Federal Housing Finance Regulatory Reform Act of 2008,” Chairman Dodd proposes to allow the Federal Housing Administration to insure refinanced mortgages of homeowners who face foreclosure. The Congressional Budget Office estimates this new program creates a potential liability for the federal government of $1.7 billion.
Reports are that Senator Shelby will only agree to the new FHA program if it is paid for by non-taxpayer funds. Senator Dodd’s bill also creates a housing trust fund with resources from Fannie Mae and Freddie Mac to build or preserve rental housing for extremely low and very low income people. Senator Shelby wants those funds to be used to pay for the new FHA program instead.
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