Legislative Progress

House Financial Services Committee Introduces Housing Legislation

On Thursday, April 17, Members of the House Financial Services Committee introduced legislation to address the housing market. The legislation combines two bills, H.R. 5830, the "FHA Housing and Homeownership Retention Act" and H.R. 5818, the "Neighborhood Stabilization Act of 2008." The former, which was originally introduced by Chairman Frank in March, would enable the Federal Housing Administration (FHA) to provide up to $300 billion in new guarantees to refinance loans for borrowers facing foreclosure. The bill calls on lenders to voluntarily write down the principal balance of loans. The Neighborhood Stabilization Act that was originally introduced by Subcommittee on Housing and Community Opportunity Chairwoman Maxine Waters (D-CA) will allocate HUD-administered loans and grants to states and cities to purchase and revitalize owner-vacated, foreclosed homes. The full committee is expected to hold a markup session and vote on the two measures Wednesday, April 23, at 10:00 a.m. and Thursday, April 24.

Freddie Mac to Buy Billions in "Conforming Jumbo" Loans

On Thursday, April 17, Freddie Mac announced plans to buy billions in so-called "conforming jumbo" loans for its portfolio from Wells Fargo, Chase, CitiMortgage and Washington Mutual. Freddie Mac estimates this will support the financing of $10-$15 billion in new jumbo mortgages in 2008. Restrictions include a 90 percent loan-to-value (LTV) and $100,000 maximum cash out for refinancings. This marks the first publicized large-scale effort to jumpstart the stalled jumbo mortgage market under the Economic Stimulus Act.

In related news, on April 17, Fannie Mae announced that it has 90-day commitments for conforming jumbo whole loans and mortgage-backed securities (MBS). Fannie Mae has been providing conforming jumbo whole loan pricing since April 1.

The Senate has been working on a bipartisan approach to quickly pass a housing stimulus package. We anticipate Senate Majority Leader Harry Reid (D-NV) will shortly announce an agreement with the following provisions:



· Modernizing the FHA according to previously passed Senate legislation, but permanently increasing the FHA loan limit to $550,000 with a 3.5 percent downpayment requirement;

· Increasing the mortgage revenue bond cap by $10 billion to allow state housing finance agencies to refinance subprime loans, provide mortgages for first-time homebuyers, and for multifamily rental housing;

· Purchasers of a home upon which foreclosure proceedings had begun would qualify for a $7,000 non-refundable tax credit on spread over two years that would not be available to newly-built homes;

· $100 million in additional funding for housing counseling services;

· Language to allow businesses to carryback net operating losses over a longer period of time - 4 years instead of 2 - so they may claim refunds of taxes paid in earlier years (we are unclear as of this writing the tax years to which this would apply).

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