Magazine article American Banker

Dodd Seeks New GSE Mandate: Bill Would Add Foreclosure-Prevention Onus

Magazine article American Banker

Dodd Seeks New GSE Mandate: Bill Would Add Foreclosure-Prevention Onus

Article excerpt

WASHINGTON -- Fannie Mae and Freddie Mac would be required to buy mortgages that have been substantially written down in value and raise capital to cover such risk under a housing rescue plan drafted by Senate Banking Committee Chairman Chris Dodd.

The proposal to change the government-sponsored enterprises' affordable housing mission to address the foreclosure crisis was tucked into a discussion draft of the Connecticut Democrat's foreclosure prevention bill that began circulating Tuesday and was obtained by American Banker.

The crux of Sen. Dodd's bill is a concept he and his House counterpart, Financial Services Committee Chairman Barney Frank, jointly endorsed two weeks ago that focuses on using the Federal Housing Administration to insure the refinancing of under-water mortgages at drastically reduced rates.

Though these lawmakers have pledged to work together on a rescue plan, Sen. Dodd's version differs by adding the GSE foreclosure prevention requirement.

Under the bill federal regulators would "establish an annual goal for the purchase by each enterprise of distressed mortgages for the purpose of assisting the mortgagor of each such mortgage to keep his or her home by restructuring the distressed mortgages."

The idea was included in an outline Sen. Dodd released this month, but it has flown under the radar as observers focused instead on legislative language offered by Rep. Frank, which did not include a GSE requirement. Sen. Hillary Clinton, D-N.Y., introduced a bill last year that also called for the creation of a foreclosure prevention goal.

Sen. Dodd's draft bill, a copy of which is available at www.americanbanker.com, gave more details on the proposal. Specifically, the bill calls for the Treasury and Housing and Urban Development departments to work with the Office of Federal Housing Enterprise Oversight to design foreclosure prevention goals. …

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