Legislative Update Part IV

House Approves Major Mortgage Reform Bill
On Thursday, November 15, the House of Representatives approved H.R. 3915, the "Mortgage Reform and Anti-Predatory Lending Act of 2007," by a vote of 291-127. If enacted, this legislation would fundamentally change mortgage practices in several areas: establish a federal duty of care in offering mortgage products; require licensing of all mortgage originators; prohibit steering; create an ability to repay standard: lower HOEPA triggers; attach limited liability to secondary market securitizers; and require an escrow account for some first-lien mortgages in certain circumstances. While the bill is intended to improve several areas of the mortgage market, H.R. 3915 will greatly limit the availability of credit and will prevent many qualified Americans from becoming homeowners.

On Wednesday, November 14, the Bush Administration issued its Statement of Administration Policy. Although the Administration supported several key goals of H.R. 3915, it believed this legislation would restrict credit for potential homebuyers and limit refinancing options for current homeowners. Action now moves to the Senate where Banking Committee Chairman Christopher Dodd (D-CT) is preparing to introduce his own reform package.
Senate Passes Terrorism Insurance Legislation

On Friday, November 16, the Senate passed S. 2285, the "Terrorism Risk Insurance Program Reauthorization Act of 2007" (TRIPRA). The bill would extend the current program by seven years (through 2014) and provide the commercial mortgage market with affordable terrorism insurance. Now that both the House and Senate have passed terrorism extension bills, they will meet in conference to negotiate the differences.

Senators Reach Agreement and Move Closer to Passing FHA Reform
This week, Senate Banking Committee Chairman Christopher Dodd (D-CT), Ranking Member Richard Shelby (R-AL) and Senator Elizabeth Dole (R-NC) reached agreement on including a 12-month moratorium for Federal Housing Administration (FHA) risk-based pricing programs in S. 2338, the "FHA Modernization Act of 2007." Senator Dole had raised objections with these programs, but this agreement now moves the Senate one step closer to passing FHA reform legislation. Senators DeMint (R-SC) and Coburn (R-OK) have placed "holds" on the bill, a procedural maneuver allowing them time to review the legislation, that has temporarily delayed passage of S. 2338.

President Signs Appropriations Bill that Funds La. Road Home Program
This week, the President signed the FY08 Appropriations Conference Committee Report for the U.S. Department of Defense. Included in the report is a Continuing Resolution (CR) to fund federal programs through December 14, while Congress works to finish the remaining appropriations bills. The CR also includes $3 billion for Louisiana's Road Home Program.

GSE Housing Goal/Fund Legislation Introduced
On Friday, November 16, Senator Jack Reed (D-RI) introduced a bill, "Government Sponsored Enterprise Mission Improvement Act of 2007," that would strengthen the affordable housing mission of Fannie Mae and Freddie Mac (GSEs). The bill would require the GSEs to set aside 4.2 basis points on each dollar of unpaid principle balance. This set-aside would go towards an Affordable Housing Block Grant Program managed by the Secretary of Housing and Urban Development (HUD), and would also be allocated for a Capital Magnet Fund managed by the Secretary of the Treasury. It would also create a new statutory duty for the GSEs to serve "underserved markets" that lack adequate credit through conventional lending sources. All measures in this bill are aimed at facilitating loan modification, refinance options and other financial activities for moderate-, low- and very low-income borrowers facing foreclosure.