The Housing and Economic Recovery Act of 2008
Filed under: Foreclosure Prevention Act, Housing and Economic Recovery Act — admin @ 11:15 am
H.R. 3221, the “omnibus” housing package has finally been passed and signed into law. The House passed the legislation on July 23rd with a vote of 272-152. In a rare weekender for the Senate, they met and passed the bill on Saturday July 26th by a vote of 72-13. The President signed the bill today July 30th, just shy of a year since the bill was introduced.
The omnibus bill is a patchwork compromise of a number of initiatives in Congress over the last year. Some of the titles of the incorporated legislation include:
- Building American Homeownership Act of 2008
- Clean Energy Tax Stimulus Act of 2008
- FHA Manufactured Housing Loan Modernization Act of 2008
- FHA Modernization Act of 2008
- Mortgage Disclosure Improvement Act of 2008
- REIT Investment Diversification and Empowerment Act of 2008
SUMMARY: GSE REFORM
This section is referred to as the “Federal Housing Finance Regulatory Reform Act of 2008” establishing the Federal Housing Finance Agency as a new, independent “world class” regulator of Fannie Mae, Freddie Mac and the Federal Home Loan Banks, known as the housing government-sponsored enterprises (GSEs).
The Agency will supplant and consolidate the Office of Federal Housing Enterprise Oversight (OFHEO) which currently resides under HUD and the Federal Home Loan Board regulating Federal Home Loan Banks. The Director of this new agency will be a political appointee of the President for a period of five years.
The duties and authority of the new Agency will be as follows:
- To provide for the financial security and sound regulation of the housing GSEs by:
- Establishing capital standards;
- Establishing prudential management standards, including internal controls, risk management, and management of the GSE portfolio;
- Establishing channels for the review and approval of new product offering;
- Establishing enforcement options, including the ability to executed cease and desist orders, civil monetary penalties and the authority to revoke officers and directors.
- Establishing authority to restrict asset growth and capital distributions for undercapitalized institutions;
SUMMARY: Improving the Housing Mission of the GSEs
The legislation is designed to enhance the affordable housing component of the GSEs mission. The most visible impact for originators will be in raising the conforming loan limits up to the greater of $417,000 or 115% of the local area median home price, capped at $625,000. While the effective date for the increase is immediate, they will not go into effect until the expiration of the Economic Stimulus limits on December 30th, 2008.
For FHA, the Act includes permanent revision of FHA loan limits to the greater of $271,650 or 115% of the local area median home price, capped at $625,000. The Act revises the required downpayment requirement from 3% to 3.5%.
In addition, the Act streamlines processing of FHA condos; the Act reforms the “reverse” mortgage (HECM) program and the FHA manufactured housing program. The result of reforms to the HECM product will be profound in higher cost areas, essentially eliminating the market for the conventional “reverse” Home Keeper product through FNMA – at least until they revise to make the product both more affordable and competitive with the FHA HECM product.
To be continued….