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ResearchWorks - Volume 6 Number 7

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ResearchWorks

Congress Acts to Boost Confidence, Stability in Housing Market

The Helping Families Save Their Homes Act of 2009 — a broad new law designed to help prevent mortgage foreclosures and enhance mortgage credit availability — represents a significant expansion of HUD's scope and responsibility. Congress passed the bill over-whelmingly on May 19, 2009 and President Obama signed it into law on May 20. "Specifically, this law improves the Federal Housing Administration's (FHA's) HOPE for Homeowners Program, making it a more flexible and attractive option for homeowners and lenders alike," said HUD Secretary Shaun Donovan.

During the signing ceremony, President Obama commented that:

"The Helping Families Save Their Homes Act advances the goals of our existing housing plan by providing assistance to responsible homeowners and preventing avoidable foreclosures. Last summer, Congress passed the HOPE for Homeowners Act to help families who found themselves 'underwater' as a result of declining home values — families who owed more on their mortgages than their homes are worth. But too many administrative and technical hurdles made it very difficult to navigate, and most borrowers didn't even bother to try.

This bill removes those hurdles, getting folks into sustainable and affordable mortgages and more importantly, keeping them in their homes. And it expands the reach of our existing housing plan for homeowners with FHA or USDA rural housing loans, providing them with new opportunities to modify or refinance their mortgages to more affordable levels."

A picture of a typical family who has easier access to an affordable mortgage because of The Helping Families Save Their Homes Act of 2009.The Act expands the reach of the Making Home Affordable (MHA) program and, as it moved through Congress, incorporated the provisions of the Homeless Emergency Assistance and Rapid Transition to Housing Act that will be discussed in the September issue of ResearchWorks.

The new law makes the HOPE for Homeowners Program more flexible and attractive by reducing costs and easing eligibility requirements for homeowners and lenders. It helps consumers avoid foreclosure and refinance their mortgages; offers incentives to servicers, encouraging them to modify loans when people are at risk of foreclosure; boosts antifraud protections for mortgage consumers; and increases the flow of credit available to the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA). In addition, FHA will facilitate loan modifications and refinances for federally guaranteed rural housing and FHA loans. The costs of program changes mandated in the legislation will be offset by reserving $2.316 billion from the total $700 billion in Troubled Asset Relief Program funds.

The Helping Families Save Their Homes Act builds on the MHA program, launched in February 2009 by HUD and the U.S. Treasury. MHA worked with a broad coalition of lenders and borrowers to provide modifications to avoid foreclosure. MHA also launched a consumer website, www.MakingHome Affordable.gov, to help homeowners determine their eligibility for federal mortgage help. The website hosted more than 17 million visitors in its first 2 months online.

The Helping Families Save Their Homes Act provides incentives for HOPE for Homeowners-enabled refinances. Servicers will evaluate all applicants for eligibility and will apply tools such as loan modifications, principal write-downs, assignment of mortgages to the HUD Secretary, short sales, and other foreclosure-avoiding techniques. The Act expresses Congress' intent that mortgage companies should not initiate a foreclosure on a first mortgage of a principal dwelling until they have attempted mitigation in accordance with the HOPE for Homeowners Program and Homeowner Affordability and Stability plan.

The new legislation allows the HUD Secretary to establish a payment to lenders and shields them from liability if they remain in compliance with their fiduciary duties under the Truth in Lending Act. Households with up to $1 million in net worth are eligible to participate. The Act increases the flexibility of rules that limit the program to a primary residence, making allowances for people who have inherited homes. It honors the leases of renters (as well as the rights of Section 8 tenants) who are living in properties that fall into foreclosure.

In other important provisions, the Helping Families Save Their Homes Act will help ease tight credit in banks and credit unions by increasing the borrowing authority of FDIC and NCUA. It makes permanent the temporary increase to $250,000 in deposits insured by the FDIC and the NCUA. The law also carries out Congress' intent that the Secretary of Treasury should purchase mortgage revenue bonds for single-family housing issued through state and local governments and their agencies.

The Act includes a number of consumer protection and fraud prevention provisions that:

  • Establish the right of homeowners to know which company owns their mortgage and when/if the mortgage changes hands;

  • Mandate that home equity conversion mortgages for the elderly guarantee an insurance period that is longer than the actuarial life expectancy of those who hold the mortgages;

  • Incorporate antifraud tools to prevent lenders from using false or misleading marketing tactics; and

  • Bar from the program companies whose personnel have engaged in fraudulent activities or are currently under HUD audit.

In addition, homeowners using the program must certify to HUD that they have not intentionally defaulted on a mortgage in the previous 5 years, provided false information, or been convicted of fraud during the past 10 years.

The new law establishes a Nationwide Mortgage Fraud Task Force in the Department of Justice that will ensure coordination of state and local entities, train officials in the detection and prosecution of mortgage fraud, and recommend legislation. The task force may also initiate and coordinate federal mortgage fraud investigations, establish a hotline for the public, and create a database of suspensions and revocations of mortgage company licenses.

You can view the full text of the Helping Families Save Their Homes Act of 2009 at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:s896enr.txt.pdf. Also, see the White House fact sheet, Reforms for American Homeowners and Consumers, at https://obamawhitehouse.archives.gov/the-press-office/reforms-american-homeowners-and-consumers-president-obama-signs-helping-families-sa.