Nation

HOUSE PASSES 3 KEY HOUSING-RELATED BILLS
The U.S. House on December 18, 2007 passed three bills that will have a big impact on the real estate industry. All three have passed the Senate and President George W. Bush signed them into law on December 20, 2007.

The bills are:

The Mortgage Forgiveness Debt Relief Act of 2007. This legislation waives taxes by creating a three-year exception for borrowers whose mortgages are modified, with a portion of their debt forgiven, to avoid foreclosure or other financial distress. Mortgage Insurance Tax Deductibility. This bill makes mortgage insurance premiums tax deductible for all mortgages originated for the next three years. Mortgage insurer Genworth Financial estimates that this tax break is worth $350 to the average taxpayer who has purchased a home with less than 20 percent down.
Terrorism Risk Insurance Act. Federal backstops for terrorism insurance, passed initially after the Sept. 11 attacks, have been extended for another seven years. The bill also expands the program's protection by including domestic terrorism. The insurance and real estate industries have pushed for an extension, saying federal guarantees to help cover catastrophic losses are crucial to stimulating the investment needed to spur economic growth.
Source: REALTOR® Magazine Online (12/18/2007)

SENATE PASSES FHA REFORM BILL
The FHA Modernization Act of 2007, passed by the U.S. Senate on December 14, would give borrowers a safer alternative to riskier mortgage products while also helping many home owners who may be facing foreclosure. "A reformed FHA is positioned to help home owners who face unaffordable mortgage payments as a result of resetting adjustable subprime loans and help bring stability to local markets and economies," says NAR President Richard (Dick) Gaylord. NAR has long supported FHA modernization legislation that would increase loan limits, reduce or eliminate the statutory 3 percent minimum cash down payment, and give FHA increased flexibility and the ability to streamline certain programs, in addition to strengthening the loss mitigation program.

In addition, the increase in FHA mortgage loan limits would help first-time home buyers, minority buyers, and people who do not qualify for conventional mortgages, according to NAR. Increased loan limits would also help people living in high-cost areas; current FHA limits make the program unusable in these areas. FHA has made mortgage insurance widely available to individuals regardless of race, ethnicity or social status during periods of prosperity and economic depression. The FHA program makes it possible for higher risk yet creditworthy borrowers to obtain prime financing.

The House had passed its own FHA bill Sept. 18. House leaders now will have to decide whether to clear the more limited Senate legislation or insist on a conference to reconcile the competing versions.

HUD DELAYS FHA RISK-BASED PRICING RULE

A final rule allowing FHA to vary the mortgage insurance premium charged to borrowers based on the amount of risk they pose won't take effect on Jan. 1, as planned, but will be delayed 60 days. The delay comes as Senate lawmakers consider imposing a 12-month moratorium on the rule. "It's good to have breathing room to let Congress work something out and let banks adjust their systems to the new rule," says FHA Commissioner Brian Montgomery. In past comments on the rule, NAR has extended its support to risk-based pricing but has raised concerns with the way HUD was planning to implement it. Among other things, the rule would define risk based on a borrower's credit score and downpayment. That's too narrow a definition, NAR says, because a credit-score test will negatively affect the availability and affordability of FHA insurance for a number of borrowers.

FED PUMPS UP BANKING SYSTEM TO TREAT CREDIT CRUNCH
The Federal Reserve announced an agreement Wednesday with four foreign central banks to inject billions of dollars into the world's financial system to make more money available for big banks to lend to smaller ones. The Fed said it would lend at least $40 billion to cash-strapped U.S. banks starting next week, and make $24 billion available to the European Central Bank and the Swiss National Bank to alleviate demand for dollars in Europe. It also has agreed to make dollars available to the Canadian and British Fed Pumps Up Banking System to Treat Credit Crunch central banks. The move is seen as an innovative approach to ending the credit crunch and warding off recession than just lowering the benchmark interest rate. "This Fed has surprised people with its ability to think outside the box," says Jay H. Bryson, global economist for Wachovia Corp. "It's trying to take a more targeted approach to financial problems, instead of the sledgehammer of cutting the benchmark federal funds rate."

By themselves, the Fed actions will not reverse slumping home prices in many parts of the country or erase trouble with mortgage-backed securities that have fallen out of favor with investors because of the subprime home loan crisis. But analysts say that the concerted effort by the central banks would help the global financial system buy time to fix the problems on its own.
Source Los Angeles Times, Peter G. Gosselin (12/13/2007)

FED UNVEILS MORTGAGE PROTECTION PLAN
The Federal Reserve is introduced its new mortgage protection plan on December 18 to help bailout struggling borrowers.

The rules it's proposing are particularly aimed at protecting those who might find subprime loans their only alternative because of low income or poor credit.

The Fed proposes these regulations:

Barring or restricting lenders from penalizing subprime borrowers who pay their loans off early.
Forcing lenders to make sure that borrowers, especially subprime ones, set aside money to pay for taxes and insurance.
Barring or limiting loans that do not require proof of a borrower's income.
Setting new standards for how lenders determine a borrower's ability to repay a home loan.

The plan, if ultimately adopted, offers Federal Reserve Chairman Ben Bernanke, who took over the helm in February 2006, an important opportunity to put his imprint on the Fed's regulatory powers.

Source: The Associated Press, Jeannine Aversa (12/18/07)