MBA's Quinn Hails Senate Passage of Housing Bill

Kieran P. Quinn, CMB, Chairman of the Mortgage Bankers Association (MBA) issued the following statement following the Senate's passage of H.R. 3221, The Housing and Economic Recovery Act of 2008.

'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. The bill will also help stabilize the housing, mortgage and capital markets.

'For nearly a decade, FHA modernization and GSE oversight reform have topped MBA's legislative and advocacy agenda. Harmonizing the low income housing tax credit with FHA's multi-family insurance programs will help spur the development of more affordable housing. The bill also contains important tax incentives designed to encourage home buyers to get off the sidelines and into the market.

'There is something in the bill for everyone. Leaders in both parties and both chambers deserve a lot of credit for getting this bill done. We are very excited at the prospect of President Bush signing the bill into law in the coming week.'

Among the provisions in the bill:

FHA Modernization: Authorizes a $25 million appropriation to improve technology, processes, program performance, eliminate fraud and provide appropriate staffing. Effective January 1, 2009, it also increases the FHA loan limit to the lesser of 115 percent of the local median home price or $625,500 with a floor for lower priced markets of $271,000, establishes a 12-month stay on 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 or through a third party).
· GSE Oversight Reform: Creates a new regulator (five-year term, appointed by the President, confirmed by the Senate) with oversight authority similar bank regulators, establishes a new affordable housing fund and capital magnet fund to be funded by a 4.2 basis point fee on all new loans, significantly changes the affordable housing goals and raises the conforming loan limit to the higher of $417,000 or 115% of the local median home price, not to exceed $625,500 (effective January 1, 2009).

· FHA Rescue: Creates a voluntary program for lenders to write down the loan balance in exchange for an FHA guaranteed loan not to exceed 90 percent of the newly appraised value of home. The lender would pay a 3 percent FHA loan origination fee. To qualify, the borrower must have a debt-to-income ratio above 31 percent on the original loan. The program is capped at $300 billion.

· Tax Incentives: Creates a $7,500 refundable tax credit for first-time home buyers, expands the volume cap for the low income housing tax credit, allows for tax-exempt treatment of bonds guaranteed by the Federal Home Loan Banks and exempts the low income housing tax credit from the alternative minimum tax.

· Low Income and Affordable Housing: Encourages the development of low-income and affordable housing by harmonizing multi-family FHA mortgage insurance programs with the low income housing tax credit. Allowing these two programs to work together will result in more effective uses of both programs.

GSE Backstop: Authorizes the Treasury Secretary to temporarily increase the GSEs' line of credit and to, if necessary, buy equity in the GSEs in order to provide confidence to credit markets. Also provides a role for Treasury and the Federal Reserve in GSE oversight to ensure safety and soundness.
· TILA Reform: Requires TILA disclosures to be delivered seven days prior to loan origination, requires that disclosures include examples of how payments would change based on rate adjustments in addition to disclosing the maximum possible payment under the loan terms and mandates that the consumer receive early disclosures before paying anything more than a nominal fee that covers the cost of a credit report.

· Empowering States: Raises the cap by $11 billion on tax-free bonds that state housing finance agencies may use to help at-risk homeowners by refinancing troubled loans and appropriates $4 billion for states to purchase and renovate abandoned and foreclosed properties.

· Licensing: Encourages state officials to create a national licensing system for residential loan originators, allows HUD to create its own national licensing system if the states fail, establishes minimum qualifications for all loan originators and requires federal regulators to create a registry for banks and thrift employees who originate loans.