Our sister site, FHALoanPros.com reports that by a vote of 272-152 the House passed H.R. 3221: The Foreclosure Prevention Act of 2008.

Next, the bill goes back to the Senate for final approval. However, while passage by the Senate is expected, the final vote is unlikely until Friday at the earliest. The reason? A number of senators, including Sen. Jim DeMint (R-SC), Sen. Tom Coburn (R-OK) and Sen. Jim Bunning (R-KY) oppose the authority given to the Treasury Department to invest in and loan to Fannie Mae and Freddie Mac.

One of the key points of the legislation is that it will raise the FHA loan limit to a maximum of $625,000. This is a compromise between those who wanted $729,750 such as leading House Democrats and the Administration which favored $550,000. This new loan limit is substantially above the 2007 FHA loan limit in the lower 48 states of $362,790 — but below the temporary 2008 limit of $729,750.

Reverse mortgage borrowers will benefit from a higher loan cap ($625,000)and also by a reduction in allowable lender fees from roughly 2 percent to 1.5 percent. HUD insurance charges remain unchanged.

The bill also halts HUD’s risk-base pricing scheme for FHA mortgage insurance for at least a year.

Also, earlier in the day the Bush Administration announced that it would not veto the legislation because “the housing legislation is so essential right now, and that we need it promptly, the President agreed to accept Secretary Paulson’s recommendation that it was more important to accept the bill in this form so that we could get the housing reforms in the form of the GSEs.”

Any veto, however, would like have been pointless. The House vote included 227 Democrats and 47 Republicans in support of the measure.

Kieran P. Quinn, CMB, Chairman of the Mortgage Bankers Association, said “considering the current state of the real estate, mortgage and credit markets, I can confidently say this is the most important piece of housing-related legislation that we have seen in more than a generation. It will help stabilize the mortgage market, stop the downward spiral of home prices in parts of this country and provide additional tools for lenders to work with borrowers to avoid foreclosure whenever possible.”

“With the U.S. financial system now under extreme duress, H.R. 3221 represents a thoughtful, comprehensive approach to address the housing and economic crisis facing the nation,” said NAHB President Sandy Dunn. “This bill is vital to restore confidence and get housing and the economy moving again.”

The centerpiece of the bill, say the home builders, is a temporary, $7,500 first-time home buyer tax credit for the purchase of any home. The tax credit can be used for homes purchased between April 9, 2008 and July 1, 2009. It is expected to spur home sales, eliminate excess inventory and bring otherwise qualified home buyers back into the market.

“The tax credit is the best stimulative measure,” said Dunn. “It will shore up home prices and halt the downward spiral in the housing market.”

HUD also issued a statement which said the “legislation is a mixed bag. The proposed legislation takes important steps to provide stability and confidence in the financial markets and in the institutions that support American’s ability to gain access to affordable mortgages.

“Yet, the bill ties our hands and denies us the proper tools to help more families. FHA has recently expanded its ability to refinance homeowners trapped in subprime adjustable rate mortgages. As we help more struggling families, FHA has implemented a fairer, more flexible pricing structure.

“Unfortunately, this legislation would ban FHA’s ability to charge differential pricing. Now, FHA will be required to increase prices on all customers or eliminate its refinancing program for subprime borrowers at a time when they need it the most.”

Major Provisions

The major provisions of the bill, according to the Mortgage Bankers Association, include the following elements:

___FHA Modernization: Authorizes a $25 million appropriation to improve technology, processes, program performance, eliminate fraud and provide appropriate staffing. Effective January 1, 2009, it also increases the FHA loan limit to the lesser of 115 percent of the local median home price or $625,500 with a floor for lower priced markets of $271,000, establishes a 12-month stay on FHA’s proposal for risk-based premiums, sets the down payment requirement at 3.5 percent and prohibits seller-funded down payment assistance (both direct or through a third party).

___GSE Oversight Reform: Creates a new regulator (five-year term, appointed by the President, confirmed by the Senate) with oversight authority similar bank regulators, establishes a new affordable housing fund and capital magnet fund to be funded by a 4.2 basis point fee on all new loans, significantly changes the affordable housing goals and raises the conforming loan limit to the higher of $417,000 or 115 percent of the local median home price, not to exceed $625,500 (the stimulus limits remain in effect until January 1, 2009).

___FHA Rescue: Creates a voluntary program for lenders to write down the loan balance in exchange for an FHA guaranteed loan not to exceed 90 percent of the newly appraised value of home. The lender would pay a 3 percent FHA loan origination fee. To qualify, the borrower must have a debt-to-income ratio above 31 percent on the original loan. The program is capped at $300 billion.

___Tax Incentives: Creates a $7,500 refundable tax credit for first-time home buyers, expands the volume cap for the low income housing tax credit, allows for tax-exempt treatment of bonds guaranteed by the Federal Home Loan Banks and exempts the low income housing tax credit from the alternative minimum tax.

___Low Income and Affordable Housing: Encourages the development of low-income and affordable housing by harmonizing multi-family FHA mortgage insurance programs with the low income housing tax credit. Allowing these two programs to work together will result in more effective uses of both programs.

___GSE Backstop: Authorizes the Treasury Secretary to temporarily increase the GSEs’ line of credit and to, if necessary, buy equity in the GSEs in order to provide confidence to credit markets. Also provides a role for Treasury and the Federal Reserve in GSE oversight to ensure safety and soundness.

___Truth in Lending Reform: Requires TILA disclosures to be delivered seven days prior to loan origination, requires that disclosures include examples of how payments would change based on rate adjustments in addition to disclosing the maximum possible payment under the loan terms and mandates that the consumer receive early disclosures before paying anything more than a nominal fee that covers the cost of a credit report.

___Empowering States: Raises the cap by $11 billion on tax-free bonds that state housing finance agencies may use to help at-risk homeowners by refinancing troubled loans and appropriates $4 billion for states to purchase and renovate abandoned and foreclosed properties.

___Licensing: Encourages state officials to create a national licensing system for residential loan originators, allows HUD to create a licensing system for those states that fail to enact their own, establishes minimum qualifications for all loan originators and requires federal regulators to create a registry for banks and thrift employees who originate loans.

This entry was posted on Wednesday, July 23rd, 2008 at 6:44 pm and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.