Magazine article Mortgage Banking

Major Housing Bill Becomes Law

Magazine article Mortgage Banking

Major Housing Bill Becomes Law

Article excerpt

Along-awaited major housing bill that would create a new regulator for the government-sponsored enterprises (GSEs), as well as modernize the Federal Housing Administration (FHA) and provide funding for FHA refinancings, passed both houses of Congress and was signed by President Bush in July.

The Housing and Economic Recovery Act of 2008 (H.R. 3221) passed the House on July 23 by a vote of 272-152, cleared the Senate on July 26 by a vote of 72-13, and the president signed the bill on July 30.

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"This is the most important piece of housing-related legislation in more than a generation. The provisions in this bill will give lenders, servicers and borrowers another tool to help keep families in their homes," said MBA Chairman Kieran. P. Quinn, CMB. "The bill will also help stabilize the housing, mortgage and capital markets."

The bill creates a new GSE regulator, appointed by the president and confirmed by the Senate to a five-year term, with oversight authority similar to that of other bank regulators. The bill also establishes a new affordable-housing fund and capital-magnet fund to be funded by a 4.2 basis point fee on all new loans while raising the conforming loan limit to the higher of $417,000 or 115 percent of the local median home price, not to exceed $625,500, effective Jan. 1, 2009.

The bill modernizes the FHA program by authorizing an appropriation to improve technology, processes and program performance; eliminate fraud; and provide appropriate staffing.

Effective Jan. 1, 2009, it also increases the FHA loan limits to the lesser of 115 percent of the local median home price or $625,000, with a floor for lower-priced markets of $271,000. It also establishes a 12-month stay on the 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 and through a third party.

Furthermore, H.R. 3221 creates a voluntary program for lenders to write down the loan balance for certain borrowers in difficulty in exchange for an FHA-guaranteed loan not to exceed 90 percent of the newly appraised value the of the home. The lender would pay a 3 percent FHA loan origination fee, and to qualify the borrower must have a debt-to-income ratio higher than 31 percent on the original loan. …

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