A bill that would support affordable housing, prevent foreclosures, and create a stronger regulator for Fannie Mae and Freddie Mac cleared a major hurdle yesterday when the two key senators involved finally found a proposal they could both accept.
"This legislation is good news for both the markets and homeowners," Sen. Christopher Dodd (D-Conn.) said yesterday in a statement released by him and colleague Sen. Richard Shelby (R-Ala.). Dodd continued, "The 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."
Known as "HOPE for Homeowners," this part of the bill would allow homeowners to refinance their homes, replacing their subprime or simply unaffordable home loans with new fixed-rate 30-year mortgages insured by the Federal Housing Administration (FHA). The initiative would allow the FHA to insure up to $300 billion in home loans. It would only apply to a homeowner's principal residence.
The overall bill, known as "The Federal Housing Finance Regulatory Reform Act of 2008," also creates a new and stronger regulator for Fannie Mae, Freddie Mac, and the Federal Home Loan Bank system. This Federal Housing Finance Agency would have more power and flexibility to set capital requirements for those government-sponsored entities (GSEs).
Adding GSE reform appears to have improved the Senate bill's chances of gaining approval from President George W. Bush, who had threatened to veto the foreclosure-prevention bill passed earlier by the House of Representatives. After a briefing yesterday with Treasury Secretary Henry Paulson, the president gave a nod to the housing-related work being done on Capitol Hill.
"It's been our policy in this administration [that] laws shouldn't bail out lenders, laws shouldn't help speculators, the government ought to be helping creditworthy people stay in their homes," Bush said. "And one way we can do that-and Congress is making progress on this-is the reform of Fannie Mae and Freddie Mac. That reform will come with a strong, independent regulator. ... [W]e look forward to working with Congress to get a good piece of legislation to my desk that helps our fellow citizens and helps us get through this housing issue."
The bill is currently with the Senate Banking Committee for discussion.
For the full text of the bill, visit http://banking.senate.gov/public/_files/GSEBill.pdf.
To read President Bush's full comments on the housing bill, visit http://www.whitehouse.gov/news/releases/2008/05/20080519.html.
Alison Rice is senior editor, online, for BUILDER magazine.