Speaking to reporters by phone during this morning’s White House Press Briefing, White House spokeswoman Dana Perino said President Bush is now prepared to sign the American Housing Rescue & Foreclosure Prevention Act, H.R. 3221, which is expected to receive full Congressional approval by this time tomorrow. According the legislation, H.R. 3221 will help families facing foreclosure keep their homes, help other families avoid foreclosures in the future, and help the recovery of communities harmed by empty homes caught in the foreclosure process.

To shore up the housing market and ensure the availability of affordable home loans, H.R. 3221 would put a new, independent regulator in charge of housing Government Sponsored Enterprises (i.e., GSEs — Fannie Mae, Freddie Mac, and the Federal Home Loan banks), which is said to be vital to both the financial markets and homeowners. The new regulator is expected to be far better prepared than the current system is to quickly and effectively respond to issues affecting the safe and sound operation of Fannie Mae, Freddie Mac, and Federal Home Loan banks.

The centerpiece of the bill provides assistance to a large number of homeowners now in danger of losing their homes. Lower-cost government-insured mortgages–which Congressional leaders say come at no cost to the American taxpayer–will be offered if President Bush signs the Bill into law, but according to the Congressional Budget Office estimates, the plan could cost taxpayers around $25 billion.

Specifically, the American Housing Rescue & Foreclosure Prevention Act, H.R. 3221, includes the following provisions:

FHA Housing Stabilization and Homeownership Retention Act

1. Provides mortgage refinancing assistance to keep at least 400,000 families from losing their homes, to protect neighboring home values, and to help stabilize the housing market at no cost to American taxpayers.
2. Expands the FHA program so many borrowers in danger of losing their home can refinance into lower-cost government-insured mortgages they can afford to repay.
3. Protects taxpayers by requiring lenders and homeowners to take responsibility. This is not a bailout, legislators say; in order to participate, lenders and mortgage investors must take significant losses by reducing the loan principal.
4. In exchange for an FHA guarantee on the mortgage, borrowers must share any profit from the resale of a refinanced home with the government.
5. Contains critical protections for taxpayers’ dollars, including higher refinancing fees that establish a new FHA reserve to cover possible losses from defaults on these government-backed mortgages.
6. Only primary residences are eligible: NO speculators, investment properties, second or third homes will be refinanced.
7. Provides $180 million for financial counseling and legal assistance to help families stay in their homes.

Strengthening Regulations of the GSEs

1. Puts an independent regulator in place with what are said to be significant responsibilities and powers so that Fannie Mae and Freddie Mac can safely and soundly work to provide families with affordable housing.
2. The new regulator will have enhanced authority to raise capital standards, set strict prudential standards, including internal controls, audits, and to enforce these new standards and promptly take corrective action.
3. The new regulator will oversee, and can directly restrict, executive compensation at Fannie Mae and Freddie Mac.
4. Raises the GSE loan limits for single family homes to create more affordable mortgage loans for moderately priced homes by allowing GSE loans up to 115% of the local area median home price, and to make GSE loans effective in high cost areas by raising the permanent loan limit from $417,000 to $625,500.
5. Creates a new permanent affordable housing trust fund–financed by the GSEs and not by taxpayers–to fund the construction, maintenance and preservation of affordable rental housing for low and very low-income individuals and families nationwide in both rural and urban areas.

Backstopping Fannie Mae and Freddie Mac To Shore Up the Housing Market

1. Gives the Secretary of the Treasury the authority to increase the already existing line of credit to Freddie and Fannie for the next 18 months, as well as giving the Treasury Department standby authority to buy stock in those companies to provide confidence in the GSEs and stabilize housing finance markets.
2. Includes taxpayer protections directing the Treasury Department to take the following into account, when using these authorities: A) Taxpayers should be first in line for being paid back, before other shareholders; and, B) There should be restrictions on dividends for shareholders and on compensation for the executives of the GSE’s until taxpayers are fully reimbursed.
3. Strengthens oversight by requiring the Federal Reserve and Treasury to consult with the new regulator on issues concerning the safety and soundness of the GSEs and use of the standby authority.

Stabilizing Neighborhoods Hurt by the Foreclosure Crisis

1. Provides $4 billion in emergency assistance (CDBG Funds) to communities hardest hit by the foreclosure and subprime crisis to purchase foreclosed homes, at a discount, and rehabilitate or redevelop the homes to stabilize neighborhoods and stem the significant losses in home values of neighboring homes.
2. Foreclosed and rehabilitated homes would be sold or rented to moderate-income individuals and families–those whose incomes do not exceed 120% of the area median income. At least 25% of the funds would be targeted to house low-income and very low-income persons and families–those whose incomes do not exceed 50% of area median income.
3. Any profit from the sale, rental, rehabilitation or redevelopment of these properties must be reinvested in affordable housing and neighborhood stabilization.
4. Provides $180 million for pre-foreclosure counseling, to be distributed in grants by the Neighborhood Reinvestment Cooperation (NeighborWorks), with 15% targeted for low-income and minority homeowners and neighborhoods, and $30 million in grants for legal counseling to assist homeowners in foreclosure.

Preventing Future Abuses and Crises

1. Establishes a nationwide loan originator licensing and registration system that will set minimum standards for loan originator licensing substantially improving the oversight of mortgage brokers and bank loan officers.
2. Establishes improved mortgage disclosure requirements that will help ensure that mortgage borrowers understand their mortgage loan terms.

FHA Modernization

1. Expands affordable mortgage loan opportunities for families (many of whom would otherwise turn to subprime lenders) and for seniors through expanded access to reverse mortgages through Federal Housing Administration reform.
2. Raises FHA loan limits to create affordable mortgage loans for moderately priced homes by allowing FHA loans up to 115% of the local area median home price, and to make GSE loans more available in high cost areas by raising the permanent loan limit from $362,790 to $625,500.
3. Expands opportunities for seniors to tap into equity in their home through FHA reverse mortgage loans, by increasing the loan limit for the program, reducing and capping lender fees for such loans, and strengthening consumer protections limiting the sale of other financial products in conjunction with FHA reverse mortgage loans.
4. Prevents HUD from raising single family loan fees on lower and middle-income borrowers, and from raising loan fees on FHA rental housing loans.

Preserving the American Dream for Our Nation’s Veterans

1. Increases VA Home Loan limit, as was done in the stimulus package, for high-cost housing areas so that veterans have more homeownership opportunities.
2. Helps returning soldiers avoid foreclosure and stay in their home by lengthening the time a lender must wait before starting foreclosure, from three months to nine months after a soldier returns from service and providing returning soldiers with one-year relief from increases in mortgage interest rates.
3. Requires the Department of Defense to establish a counseling program for veterans and active service members facing financial difficulties and provides a moving benefit to servicemen and women who are forced to move out because their rental housing was foreclosed on.
4. Increases benefits paid to veterans with disabilities, such as blindness, to adapt their housing and allows the Veterans Administration to provide for improvements to homes of veterans with service-connected disabilities.

Tax Provisions to Expand Refinancing Opportunities and Spur Home Buying (H.R. 5720)

1. Provides $15 billion in tax benefits, including tax credits to first-time homebuyers, a real property tax deduction for non-itemizers, an additional $11 billion in mortgage revenue bonds for states, and improves access to low-income housing.
2. Gives first-time homebuyers a refundable tax credit that works like an interest-free loan of up to $7,500 (to be paid back over 15 years) to spur home buying and stabilize the market. The credit will begin to phase out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return).
3. Provides taxpayers that claim the standard deduction with up to an additional $500 ($1,000 for a joint return) standard deduction for property taxes in 2008.
4. Temporary increase in mortgage revenue bond authority to allow for the issuance of an additional $11 billion of tax-exempt bonds to refinance subprime loans, provide loans to first-time homebuyers and to finance the construction of low-income rental housing.
5. Temporary increase in low-income housing tax credit and simplification of the credit to help put builders to work to create new options for families seeking affordable housing alternatives.

The Wall Street Journal reports this morning that President Bush’s support of the measure is a “dramatic split” for both Bush and congressional Republicans, many of whom the Journal says are “angrily opposed to the housing legislation, which they call a handout for irresponsible homeowners and unscrupulous lenders.” President Bush had voiced earlier objections to a provision that would give grants for local governments to purchase and refurbish foreclosed properties–a provision the White House feels amounts to nothing more than a bailout. But White House spokeswoman Perino said today that President Bush doesn’t feel this is the right time for a “…prolonged veto fight, but we are confident the President would prevail in one.”