Washington, DC - The U.S. House of
Representatives today passed H.R. 3221, one of the most important
housing reforms in decades, by a vote of 272 to 152. The bill, the
American Housing Rescue and Foreclosure Prevention Act, represents the
most comprehensive response yet to the American mortgage crisis, and
will help families facing foreclosure keep their homes, help other
families avoid foreclosures in the future, and help the recovery of
communities harmed by empty homes caught in the foreclosure process.
“Of the problems that were created by the reckless
deregulation that led to the subprime crisis and the neglect of
affordable housing that has marked Republican rule in Congress, this
package of measures is the best response we could make. It cannot
solve all of these deep rooted problems immediately but the bill does
represent a mutually reinforcing set of approaches that will begin to
diminish the problem,” said House Financial Services Committee
Chairman Barney Frank (D-MA). “This will begin to lay the groundwork
for a turnaround in the housing market and hopefully in the broader
economy as well.”
“This bill contains the most significant expansion and
improvement of tax programs designed to provide affordable housing for
low and moderate-income individuals, since the inception of the
low-income housing tax credit in 1986,” said Ways and Means Committee
Chairman Rangel (D-NY). “First, the bill would expand and improve the
low-income housing tax credit, which is the largest source of federal
support for the construction and rehabilitation of affordable
housing. Second, the bill increases volume limits on housing bonds to
finance low-income rental housing and first-time homebuyers, while
also providing states with greater flexibility on how to use those
bonds efficiently. These improvements will go a long way to address
the shortage of affordable housing options in our cities and towns.”
“This housing rescue package will help address our
nation’s foreclosure crisis and improve our economy and financial
markets. I am pleased that $4 billion of vital funding to help states
and localities purchase and fix up abandoned and foreclosed homes is
included. In addition, modernizing the Federal Housing Administration
will provide many homebuyers in California access to safer loan
products through FHA,” said Financial Services Subcommittee on Housing
and Community Opportunity Chairwoman Maxine Waters (D-MA).
“The tax provisions in this bill are an appropriate mix
of incentives for home purchasers, owners, and renters, for builders,
developers, and lenders. Quite simply, they help the housing and real
estate industry re-gain their footing. And they offer struggling
homeowners a life-line. This bill offers hope that if we can get this
industry moving again and provide security for distressed homeowners,
perhaps we can get the economy back on track,” said Rep. Richard E.
Neal, Chairman of the Ways and Means Subcommittee on Select Revenue
Measures.
Financial Services Oversight and Investigations
Subcommittee Chairman Melvin L. Watt (D-NC) said, “This could well be
the most important legislation to impact housing, responsible credit
and economic recovery that we have passed in the 16 years I have
served in Congress. I wish we hadn’t needed a crisis to get to this
point but, unfortunately, necessity is more of a driving force than
foresight.”
H.R. 3221 will also shore up the housing market and
ensure the availability of affordable home loans, strengthen
neighborhoods hardest hit by the foreclosure crisis by providing
resources to allow cities and states to buy up and rehabilitate
foreclosed properties, expands homeownership opportunities for
veterans and helps returning soldiers avoid foreclosure and stay in
their home, provides tax breaks to spur home buying; and creates an
Affordable Housing Trust Fund to boost the nation’s stock of
affordable rental housing in both rural and urban areas for low and
very low-income individuals and families.
To stabilize the housing finance market, and make sure
that affordable home loans continue to be available, H.R. 3221 also
includes provisions to give necessary stand-by authority to the
Treasury Department in the unlikely case that the GSEs require
temporary federal financial intervention. This authority is the best
way to boost market confidence in the GSEs and reduce the likelihood
that the government would need to lend a hand.
Please click here for a copy of the text of the bill:
http://www.house.gov/apps/list/press/financialsvcs_dem/hr3221_bill_text.pdf
Key Provisions in H.R. 3221, The American
Housing Rescue & Foreclosure Prevention Act
FHA Housing Stabilization and Homeownership Retention Act
· Provides mortgage refinancing assistance to keep at least
400,000 families from losing their homes, to protect neighboring home
values, and to help stabilize the housing market at no cost to
American taxpayers.
· Expands the FHA program so many borrowers in danger of
losing their home can refinance into lower-cost government-insured
mortgages they can afford to repay.
· Protects taxpayers by requiring lenders and homeowners to
take responsibility. This is not a bailout; in order to participate,
lenders and mortgage investors must take significant losses by
reducing the loan principal. In exchange for an FHA guarantee on the
mortgage, borrowers must share any profit from the resale of a
refinanced home with the government.
· Contains critical protections for taxpayers’ dollars,
including higher refinancing fees that establish a new FHA reserve to
cover possible losses from defaults on these government-backed
mortgages.
· Only primary residences are eligible: NO speculators,
investment properties, second or third homes will be refinanced.
· According to CBO, this three-year program, starting
October 1, 2008, will not cost taxpayers a dime, as it is more than
paid for by using funds in the first few years from the Affordable
Housing Trust Fund.
· Provides $180 million for financial counseling and legal
assistance to help families stay in their homes.
Strengthening Regulations of the GSEs
· Puts a strong independent regulator in place with real
teeth, with real responsibilities and powers so that Fannie Mae and
Freddie Mac can safely and soundly work to provide our nation’s
families with affordable housing, as Democrats have been calling for
since 2004.
· The new regulator will have enhanced authority to raise
capital standards, set strict prudential standards, including internal
controls, audits, and to enforce these new standards and promptly take
corrective action. The new regulator will oversee, and can directly
restrict, executive compensation at Fannie Mae and Freddie Mac.
· Raises the GSE loan limits for single family homes to
create affordable mortgage loans for moderately priced homes by
allowing GSE loans up to 115% of the local area median home price, and
to make GSE loans effective in high cost areas by raising the
permanent loan limit from $417,000 to $625,500,.
· Creates a new permanent affordable housing trust fund –
financed by the GSEs and not by taxpayers – to fund the construction,
maintenance and preservation of affordable rental housing for low and
very low-income individuals and families nationwide in both rural and
urban areas.
Backstopping Fannie Mae and Freddie Mac To Shore Up the
Housing Market
· Gives the Secretary of the Treasury the authority to
increase the already existing line of credit to Freddie and Fannie for
the next 18 months, as well as giving the Treasury Department standby
authority to buy stock in those companies to provide confidence in the
GSEs and stabilize housing finance markets.
· Includes meaningful taxpayer protections directing the
Treasury Department to take the following into account, when using
these authorities:
o Taxpayers should be first in line for being paid back,
before other shareholders.
o There should be restrictions on dividends for shareholders
and on compensation for the executives of the GSE’s until taxpayers
are fully reimbursed.
· Strengthens oversight by requiring the Federal Reserve and
Treasury to consult with the new regulator on issues concerning the
safety and soundness of the GSEs and use of the standby authority.
· While Fannie Mae and Freddie Mac both now meet the capital
and liquidity requirements set by their regulator, given the severe
turmoil in the markets, the standby authority is needed to increase
market confidence and enable both enterprises to continue to raise
capital and maintain the availability of mortgage credit.
· The non-partisan Congressional Budget Office says “There
is a significant chance -- probably better than 50 percent -- that the
proposed new Treasury authority would not be used before it expired at
the end of December 2009.” CBO estimates that, if used, the federal
budgetary cost of this proposal would be $25 billion over fiscal years
2009 and 2010.
· Because CBO estimates that these provisions could increase
direct spending, we need to waive PAYGO rules in order to consider
it. The bill requires the Treasury Secretary to make an emergency
designation before using the authority -- certifying that he is acting
to provide stability to financial markets, prevent disruptions in the
availability of mortgage finance, protect the taxpayers, and
facilitate an orderly restoration of private markets. No spending
would occur unless the Secretary certifies that there is an emergency
that requires immediate action. However, if those conditions are not
met, there would not be any increase in the deficit as a result of
this legislation.
Stabilizing Neighborhoods Hurt by the Foreclosure Crisis
· Provides $4 billion in emergency assistance (CDBG Funds)
to communities hardest hit by the foreclosure and subprime crisis to
purchase foreclosed homes, at a discount, and rehabilitate or
redevelop the homes to stabilize neighborhoods and stem the
significant losses in home values of neighboring homes.
· Foreclosed and rehabilitated homes would be sold or rented
to moderate-income individuals and families -- whose incomes do not
exceed 120 percent of the area median income. At least 25 percent of
the funds would be targeted to house low-income and very low-income
persons and families -- whose incomes do not exceed 50 percent of area
median income.
· Any profit from the sale, rental, rehabilitation or
redevelopment of these properties must be reinvested in affordable
housing and neighborhood stabilization.
· Provides $180 million for pre-foreclosure counseling, to
be distributed in grants by the Neighborhood Reinvestment Cooperation
(NeighborWorks) – with 15 percent targeted for low-income and minority
homeowners and neighborhoods, and $30 million in grants for legal
counseling to assist homeowners in foreclosure.
Preventing Future Abuses and Crises
· Establishes a nationwide loan originator licensing and
registration system that will set minimum standards for loan
originator licensing substantially improving the oversight of mortgage
brokers and bank loan officers.
· Establishes improved mortgage disclosure requirements that
will help ensure that mortgage borrowers understand their mortgage
loan terms.
FHA Modernization
· Expands affordable mortgage loan opportunities for
families (many of whom would otherwise turn to subprime lenders) and
for seniors through expanded access to reverse mortgages through
Federal Housing Administration reform.
· Raises FHA loan limits to create affordable mortgage loans
for moderately priced homes by allowing FHA loans up to 115% of the
local area median home price, and to make GSE loans more available in
high cost areas by raising the permanent loan limit from $362,790 to
$625,500.
· Expands opportunities for seniors to tap into equity in
their home through FHA reverse mortgage loans, by increasing the loan
limit for the program, reducing and capping lender fees for such
loans, and strengthening consumer protections limiting the sale of
other financial products in conjunction with FHA reverse mortgage
loans.
· Prevents HUD from raising single family loan fees on
lower- and middle-income borrowers, and from raising loan fees on FHA
rental housing loans.
Preserving the American Dream for Our Nation’s Veterans
· Increases VA Home Loan limit, as was done in the stimulus
package, for high-cost housing areas so that veterans have more
homeownership opportunities.
· Helps returning soldiers avoid foreclosure and stay in
their home by lengthening the time a lender must wait before starting
foreclosure, from three months to nine months after a soldier returns
from service and providing returning soldiers with one-year relief
from increases in mortgage interest rates.
· Requires the Department of Defense to establish a
counseling program for veterans and active service members facing
financial difficulties and provides a moving benefit to servicemen and
women who are forced to move out because their rental housing was
foreclosed on.
· Increases benefits paid to veterans with disabilities,
such as blindness, to adapt their housing and allows the Veterans
Administration to provide for improvements to homes of veterans with
service-connected disabilities.
Tax Provisions to Expand Refinancing Opportunities and Spur
Home Buying (H.R. 5720)
· Provides $15 billion in tax benefits, including tax
credits to first-time homebuyers, a real property tax deduction for
non-itemizers, an additional $11 billion in mortgage revenue bonds for
states, and improves access to low-income housing.
· Gives first-time homebuyers a refundable tax credit that
works like an interest-free loan of up to $7,500 (to be paid back over
15 years) to spur home buying and stabilize the market. The credit
will begin to phase out for taxpayers with adjusted gross income in
excess of $75,000 ($150,000 in the case of a joint return).
· Provides taxpayers that claim the standard deduction with
up to an additional $500 ($1,000 for a joint return) standard
deduction for property taxes in 2008.
· Temporary increase in mortgage revenue bond authority to
allow for the issuance of an additional $11 billion of tax-exempt
bonds to refinance subprime loans, provide loans to first-time
homebuyers and to finance the construction of low-income rental
housing.
· Temporary increase in low-income housing tax credit and
simplification of the credit to help put builders to work to create
new options for families seeking affordable housing alternatives.
· The cost of the bill (except for the Fannie Mae/Freddie
Mac provisions) is fully offset with a tax compliance provision from
the President’s Budget (requiring credit card companies to report more
information to the IRS about credit card transactions) and by delaying
the effective date of a tax benefit for multinational companies that
has not yet taken effect.
Debt Limit Increase
· Increases the debt limit to $10.6 trillion, as requested
by the Bush Administration. This $800 billion increase is identical
to provision the House automatically passed as part of the budget
resolution conference report. The Senate has not yet enacted this
provision, which is critical to ensure that the federal government can
effectively manage its finances through next year. |