Legal Updates From David S. Ged, P.A.

Mortgage Bankers Association of Southwest Florida Legislative Update
April 17, 2008

Housing Stimulus Package – Senate

On April 3rd, the Senate began debate on a Housing Stimulus Package designed to address the instability in the housing market. This bill did not include a bankruptcy “cramdown” provision. Although an effort was made on the Senate floor to add this provision by amendment (it ultimately voted down).

Follow up:

This legislation was passed by a vote of 84-12 on April 10th, and includes the following provisions:

Foreclosure Mitigation: This bill provides $4 billion in grant money to local towns and cities as an incentive to buy foreclosed property and renovate them.

Counseling Assistance: Additional foreclosure prevention counseling funding of
$100 million, bringing total foreclosure prevention funding to $280 million over the past year.

FHA Modernization: This bill includes the FHA Modernization legislation which was passed by the Senate last December. This bill does increase the down payment requirement from 3 to3.5% and supports the increase of the FHA loan limit as high as $550k.

Enhanced Disclosure: Would require that all loan disclosures be provided no more than 7 days prior to closing to give consumer time to react if the loan terms are unsatisfactory. The bill would also mandate the disclosure of maximum monthly payments to borrowers and impose penalties to lenders for violations of these provisions.

Tax Credits: Allows a $7,000 tax credit to homebuyers (over 2 years) as an
incentive to purchase foreclosed homes. Also allows for tax relief for businesses, including homebuilders. It also permits homeowners who do not itemize to take a second standard deduction for property taxes.

Mortgage Bonds: Provides $10 billion annually in Federally tax-exempt bonds to Housing Finance Agencies in order to assist borrowers in refinancing loans and modifying mortgage agreements;

Veterans Exemptions: Increases the amount of time a lender must wait before
initiating the foreclosure process from 3 months to as long as 9 months after a soldier returns from service. Soldiers who are returning from service may also have claim 1 year of relief from mortgage interest rate increases on existing mortgages.

MBA has expressed their support of this bill, as it includes many provisions which support their agenda to stabilize the housing market (see attached), including FHA Modernization, tax incentives, greater disclosure and additional mortgage bonds.

Before any of these provisions become law, the House is working on passing a similar bill, and the House and Senate versions will have to be reconciled in order for it to be presented to the President.

MBA’s Agenda to Stabilize the Housing Market

The mortgage industry is taking unprecedented steps to assist borrowers and help them stay in their homes. Both on their own and though coordinated efforts like the HOPE Now alliance, mortgage lenders have helped over one million people through loans modifications and workout plans since July 2007. But there is more to do, and Congress and the Administration can help.

Congress and the Administration can help keep people in their homes by addressing policy issues in three areas: stabilizing the mortgage market, helping distresses borrowers and ensuring that the problem as we see in today’s market do not recur. At the same time, it is important that Congress not take action like allowing bankruptcy cram downs that could further destabilize the market by increasing borrowing cost, promoting uncertainty or limiting the availability of credit.

STABILIZING THE MARKET

1. Modernize the Federal Housing Administration (FHA)
MBA continues to support legislation to allow FHA to be more efficient and timely in meeting the needs of borrowers. A revitalized FHA is crucial to helping low-and-moderate-income and first time homebuyers realize the American dream of homeownership. MBA supports the FHA. Secure initiative and seeks to continue its efforts to ensure enactment of meaningful FHA reform.

2. Reform the regulation of the Housing GSEs
MBA supports strong, effective regulatory oversight of Fannie Mae, Freddie Mac and the Federal Home Loan Banks (FHLBs) that includes a single regulator-like power to ensure that the GSEs focus on their core mission functions, have appropriate affordable housing goals and are financially safe and sound.

3. Use tax Incentives to Stop the Decline in Home Prices
In this time of declining homes prices, Congress can use new tax incentives to encourage first time homebuyers and others to purchase foreclosed, abandoned or other distressed properties. Doing so will spur the demand for housing, which will have the effect of slowing and possibly even stopping the nationwide decline in home prices.

ASSISTING BORROWERS AND RENTERS

4. Borrower “Rescue” Plans
A number of borrower “rescue” plans have been proposed to help stem the tide of foreclosures. The proponents of such plans have included policymakers, federal agencies, and key stakeholders including industry, academia, and the public sector. Congress should quickly complete their consideration of these plans so that their benefits can make it out to the market immediately.

5. Housing Finance Agencies’ (HFA) Mortgage Revenue Bonds (MRBs)
MBA supports legislation to allow the state HFAs to issue tax-free MRBs, the proceeds from which would be used to refinance mortgages for distressed borrowers.

PREVENTING FUTURE PROBLEMS – ANTI-PREDATORY LENDING EFFORTS

6. Uniform national Standard
A balanced, uniform, preemptive national anti-predatory lending standard will provide strong consistent consumer protections and objective compliance standards. It will give consumers one set of rules to understand, and lenders one set of laws to adhere to.

7. Licensing of Loan Originators
Individual single-family loan originators should all be licensed, with some exceptions. In addition, all originators should be registered in a nationwide database. Homeowners and potential homeowners should know that the person offering them a loan is a qualified professional who can be held accountable by a regulator in the case of wrongdoing.

8. Enhanced Disclosures
The mortgage closing process is complicated, even for mortgage professionals. By increasing transparency in the system, we can keep predatory lending practices from hiding in plain sight. The Department of Housing and Urban Development is currently making an effort to reform the mortgage process by regulation. The Federal Reserve Board also has similar efforts underway. Congress should support these efforts.

9. Ensuring Accurate Appraisals
An accurate appraisal is necessary to any real estate transaction, for the buyer, seller and the lender. The lender has the most to lose when an inaccurate appraisal is used to make a loan decision. MBA will continue to work to ensure appraisals are accurate and performed by independent appraisers.

10. Fighting Fraud Against Lenders
MBA seek $6.25 million in dedicated funding for 30 new FBI field investigators, two new dedicated prosecutors at the Department of Justice to coordinate prosecution efforts with the U.S. Attorneys’ offices, and $750,000 to support the operations of FBI Interagency Task Forces in the areas with the 15 highest concentrations of mortgage fraud.