The U.S. Senate Committee on Banking, Housing, and Urban Affairs, yesterday announced they reached an agreement on legislation entitled “The Federal Housing Finance Regulatory Reform Act of 2008,” which includes efforts to:
- Help prevent the rising number of foreclosures
- Create more affordable housing for consumers
- Reform the regulation of the government-sponsored enterprises (GSEs) in order to improve their role in the housing finance system
According to CNNMoney.com, provisions of the proposed legislation include:
- Allowing the Federal Housing Administration to insure $300 billion in new loans for at-risk borrowers if lenders agree to write down loan balances below the appraised value of borrowers’ homes.
- Stricter oversight of Fannie Mae and Freddie Mack. The two government-sponsored enterprises guarantee the purchase and sale of home mortgages in the secondary market.
The new FHA program could benefit an estimated 500,000 people, reports CNNMoney.com. It could cost as much as $500 million, which would be paid for by Fannie and Freddie. If it turns out the costs fall below that level–that is, should few if any borrowers default on their new FHA loans–the funds from Fannie and Freddie would be redirected back to the affordable housing trust fund.
The Senate Banking Committee is scheduled to debate and vote on the bill later today. The measure is certain to pass at both the committee and full Senate levels in time to go to President Bush before the July 4 congressional recess, reports CNNMoney.com. It remains an open question whether President Bush would support the bill. He did, after all, threaten to veto a similar bill sponsored by Congressman Barney Frank and passed by the House of Representatives several weeks ago. But Senator Dodd said that while the Bush White House hasn’t endorsed his bill yet, “there’s been some positive reaction out of the White House.”