The U.S. Senate on Monday voted 76-10 to advance the housing bill by limiting debate. The newest version of the bill eliminates a number of controversial provisions, including an extension of business net operating loss carry-backs to four years and a package of tax breaks for renewable energy. Due to procedural issues regarding the renewable energy section, the Senate was unable to finish work on the housing bill before its Fourth of July recess.
“It was my hope that this bill would have been on the President's desk by now, but regrettably we were unable to achieve that goal because of unfortunate delaying tactics,” said Sen. Christopher Dodd (D-Conn.) during yesterday’s session. “Had we passed the legislation and sent it to the President, as I argued for, before July 1, I think we would have avoided some 90,000 filings that occurred during the period we were on this recess. Not only are these families threatened with foreclosure, but their neighbors and their communities will see falling home prices, rising crime rates, and fewer resources for local schools, police, fire, libraries, and other services,” he added.
In its current form, the bill (H.R. 3221) attempts to address many aspects of the housing crisis.
A voluntary program called the HOPE for Homeowners Act would help roughly a half-million households at risk of foreclosure by allowing them to refinance into a mortgage backed by the Federal Housing Administration. Lenders will have to absorb some of the losses involved in refinancing these often-underwater loans, and borrowers will be required to share both their equity and future housing appreciation with the FHA. “There are many protections built into the program,” Dodd said. “Only homeowners can qualify; no investors or speculators will be allowed to participate; borrowers would have to show they cannot afford their current mortgages; and all loans will be underwritten at a level the borrower can afford to pay. New loans will be 30-year fixed-rate mortgages.”
The Federal Housing Administration would also be “modernized.” Among the reforms would be an increase in FHA loan limits to $625,000 in high-cost areas and the removal of seller-provided downpayment assistance to buyers.
Nearly $4 billion in community development block grants will go to localities dealing with the crime, vandalism, and other problems associated with foreclosures and vacant homes in their neighborhoods.
Finally, the bill would establish a new regulator for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks and create a new affordable housing trust fund.
If the Senate approves this version of the housing rescue bill, members of the House and Senate will need to resolve the differences in their respective versions of the bill before submitting it to the president. Areas where the two bills conflict include FHA loan limits and the timeline for imposing new rules on Fannie and Freddie.
Alison Rice is senior editor, online, for BUILDER magazine.