MAJOR LEGISLATION TO STRENGTHEN ECONOMY AND HELP HOMEOWNERS NATIONWIDE PASSES SENATE 72-13
Bipartisan bill will help struggling homeowners, communities, housing markets
July 28, 2008
WASHINGTON, DC – Senators Chris Dodd (D-CT) and Richard Shelby (R-AL), Chairman and Ranking Member of the Senate Committee on Banking, Housing and Urban Affairs, today announced that the Senate passed the Housing and Economic Recovery Act by a vote of 72-13. This legislation is expected to help hundreds of thousands of Americans who are struggling to keep their homes, as well as countless homeowners and communities who are already experiencing the devastating effects of foreclosure. The legislation also contains comprehensive reforms to our nation’s housing sector, including the creation of a strong, new regulator for the government-sponsored enterprises. In response to recent turmoil in our financial markets, the bill also includes provisions requested by the Treasury Department to restore confidence in Fannie Mae and Freddie Mac.
The Housing and Economic Recovery Act – the most comprehensive housing legislation in over a generation – is the product of months of bipartisan, bicameral collaboration. The bill will now be sent to the President, who has said he will sign it.
In addition, Chairman Dodd announced today that he will convene a meeting this week with the Board of HOPE for Homeowners, an initiative created by the legislation to prevent foreclosures, to ensure that the program is implemented expeditiously. The Board includes the heads of the Treasury Department, Federal Reserve Board, FDIC and HUD.
“With one of every eight homes projected to enter foreclosure over the next five years, and the economy shedding jobs as the costs of energy, health care and food skyrocket, the American dream has become a nightmare for countless families across the country,” said Dodd. “Today, Congress did more than send a bill to the President – we sent a message to American families that help is on the way. In addition to providing urgently-needed relief to homeowners on the brink of losing their homes, this legislation will address our broader economic problems by helping to reform our housing sector and provide reassurances to our financial markets. I am proud to have partnered with Senator Shelby on this effort – the strong, bipartisan bill we produced is proof that partisan gridlock is not a foregone conclusion when we work together in good faith and in common cause to solve our nation’s most pressing problems. I look forward to the President signing this bill into law as soon as possible.”
“Today’s overwhelming vote underscores the merit of this legislation,” said Shelby. “We have created a strong GSE regulator, as well as the conditions necessary for a recovery in housing markets. We must now pursue vigorous oversight of the implementation and effectiveness of our efforts. Now that the debate is over on reform of the GSEs and the permanent systemic risks they pose, I look forward to a robust discussion as to where the responsibility to monitor that risk should reside once the Fed’s temporary authority expires.”
The legislation contains a number of provisions that will help homeowners and communities. The legislation also includes several tax measures authored by Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Chuck Grassley (R-IA). Key provisions include:
- The HOPE for Homeowners Act: Creates an initiative within the Federal Housing Administration (FHA) to prevent foreclosures for hundreds of thousands of families at no estimated cost to American taxpayers.
- Assistance for Communities Devastated by Foreclosures: To ensure that communities can mitigate the harmful effects of foreclosures, $3.92 billion in supplemental Community Development Block Grant Funds will be provided to communities hardest hit by foreclosures and delinquencies.
- Foreclosure Counseling for Families in Need: To help families avoid foreclosure, the bill provides $180 million in additional funding for housing counseling and legal services for distressed borrowers.
· GSE Reform: Creates a world class regulator for the government-sponsored enterprises (GSEs) so that these vital institutions can safely and soundly carry out their important mission of providing our nation’s families with affordable housing.
- Treasury Emergency Authority: To shore up confidence of the financial markets in Fannie Mae, Freddie Mac and the Federal Home Loan Banks, the legislation contains several temporary provisions requested by the Treasury Secretary including authority for Treasury to purchase common stock and debt securities issued by the GSEs.
- Preserving the American Dream for Our Nation’s Veterans: This bill contains several provisions to help returning soldiers avoid foreclosure, including lengthening the time a lender must wait before starting foreclosure from three months to nine months after a soldier returns from service.
- FHA Modernization: Reforms to modernize, streamline and expand the reach of the FHA, allowing families in all areas of the country to access secure and affordable mortgages through FHA.
· Affordable Housing Fund: A new, permanent fund that will help create more affordable housing for Americans in communities across the country.
- Enhancing Mortgage Disclosure: To ensure that consumers know the exact amounts of their mortgage payments, including the maximum possible payment under the terms of the loan and changes in payments associated with adjustable rate mortgages, lenders will be required to provide borrowers with more timely and meaningful mortgage disclosures on all home purchase loans, loans that refinance a home, and loans that provide a home equity line of credit.
- Standard Property Tax Deduction: To make tax relief available to all American homeowners, the bill will provide a standard deduction – $500 for single filers and $1,000 for joint filers – for the 28.3 million non-itemizers who pay property taxes. Present law allows only those who itemize deductions on their federal tax returns to deduct state and local property taxes from their income.
- Mortgage Revenue Bonds: To provide for refinancing of subprime loans, mortgages for first-time homebuyers and multifamily rental housing, $11 billion of Federal tax-exempt private activity bond authority is included in this bill.
- Credit for First-Time Homebuyers: The bill includes a refundable tax credit that is equivalent to an interest-free loan equal to 10 percent of the purchase of the home (up to $8,000) by first-time homebuyers to help reduce the existing stock of unoccupied housing.
- Increase in low-income housing tax credit: The Low-Income Housing Tax Credit program helps finance the development of rental housing for low-income families. Under current law, there is a state-by-state limit on the annual amount of federal low-income housing tax credits that may be allocated by each state. The bill would increase these limits.
A detailed summary of the legislation is attached.
Click for summary of legislation