WASHINGTON (7/15/08)—House Financial Services Committee Chairman Barney Frank (D-Mass.) Monday reiterated his intention to have a package of housing reforms ready soon for the president’s signature. Frank described what the bill will look like. The chairman issued his statement after the Senate voted 63-5 Friday in favor of a bill to respond to the subprime mortgage crisis. The Senate sent the legislative package back to the House of Representatives for further modifications. The House passed a similar bill earlier this year, and now the two bodies must reconcile differences to work out a bill that they hope will be signed into law by President George W. Bush later this week. In a statement, Frank noted that the current “turmoil” in the American mortgage markets is at the root of a financial crisis that has “undermined confidence in and threatens the stability of the global financial system.” He said Congress will soon send the president a comprehensive package of legislation that “makes future crises less likely” by:
* Responding to the current situation; * Strengthening regulatory oversight and prohibiting the irresponsible lending practices that brought us here; and * Addressing the lack of affordable housing in America.
“First, the legislation we will pass creates a new regulator for the (government-sponsored enterprises) GSEs with strong additional powers. We also make it possible for the FHA to assist homeowners facing foreclosure by refinancing them into sustainable loans. The bill will also strengthen the FHA’s capacity to resume its historical role as a lender of first resort for working families and first time homebuyers.” Frank also pledged that the bill would have proposals announced over the weekend by U.S. Treasury Secretary Henry Paulson to ensure that Fannie Mae and Freddie Mac have the resources needed to continue to play their role in America’s housing finance system. “Third, in a long overdue measure, the legislation creates an affordable housing trust fund that allows us to address decades of under investment in the supply of housing for lower income families,” Frank said. The bill approved Friday by the Senate would set up a new program to allow the FHA to refinance $300 billion worth of distressed subprime home mortgages and place them into 30-year fixed-rate FHA-backed mortgages. It is expected to provide aid for approximately half a million borrowers struggling to hang onto their homes. The program would allow certain mortgage holders to get an FHA guarantee on a loan if they write down the principal amount. The bill also adds housing tax breaks. For instance:
* Taxpayers who do not itemize deductions can deduct some property taxes; * First-time homebuyers would be offered refundable tax credits’ $11 billion of private activity bonds are authorized to refinance and rehabilitate subprime homes; and * $3.92 billion is provided in Community Development Building Grant (CDBG) funds to mitigate the effects of the mortgage and credit crises.