Housing Bill Passes Senate Committee

H.R. 634, The Federal Housing Finance Regulatory Reform Act of 2008, was passed by the U.S. Senate Committee on Banking, Housing and Urban Affairs by a vote of 19-2 today. The bill includes foreclosure prevention initiatives and reform to the regulation of the government-sponsored enterprises that will improve their role in the housing finance system.

“The bill addresses the root of our current economic problems — the foreclosure crisis — by creating a voluntary initiative at no estimated cost to taxpayers which will help Americans keep their homes,” an announcement yesterday from the committee stated. “The bill also establishes a new fund that will help create more affordable housing for millions for Americans. Finally, this legislation takes a balanced approach toward reforming the GSEs, creating a world-class regulator with enough authority to help these vital institutions operate in a safe and sound manner, while better fulfilling their important mission of providing affordable housing for Americans.”

The Bush administration quickly praised the bill’s passage.

U.S. Treasury Secretary Henry M. Paulson noted strong, comprehensive GSE reform is the most significant component of the legislation.

He explained that with the growing share of mortgages being guaranteed by Fannie and Freddie, a world-class regulator with adequate authority will help restore investor confidence in how they are overseen and regulated. Confidence in the two companies will help bring down mortgage finance costs, which is essential to reaching the end of the correction.

“The new agency will also bring new efficiencies to regulation of the Federal Home Loan Banks in a manner that recognizes their unique mission and ownership structure,” the American Bankers Association said in a press release. “The agency will take into consideration the substantial differences among the GSEs, and particularly with regard to the significant differences between the FHLBs and Fannie Mae and Freddie Mac with regard to their missions, their lines of business, and the customers they serve.”

James B. Lockhart, director of Fannie’s and Freddie’s current regulator the Office of Federal Housing Enterprise Oversight, also applauded the bill’s passage. He said the bill will enhance oversight of Fannie, Freddie and the Federal Home Loan Banks and give the new regulator the tools necessary to ensure their safety and soundness.

The Mortgage Bankers Association hailed the committee’s passage of the legislation and suggested it will help curb foreclosures. Like Paulson, the group said the bill will help speed the recovery of the housing and mortgage sectors.

“The proposal to allow FHA to assist troubled borrowers has the potential to help stabilize markets and avoid foreclosures,” MBA stated. “We want to ensure there are appropriate safeguards to help deserving borrowers while keeping the program voluntary for lenders.”

While they expressed support for the bill, the National Association of Realtors wants to see the temporary increases to conforming loan limits made permanent, as is the case with House legislation.

But one group that is not happy with the bill is FreedomWorks.

“The bill raises taxes by a stunning $500 million a year on the businesses that insure or purchase more than 80 percent of America’s mortgages,” the Washington, D.C.-based organization claims. “The tax increase is part of broader housing legislation that will provide $300 billion in new taxpayer loans through the FHA. The new program allows banks to cherry-pick the worst loans in their portfolio and roll them over 100 percent to U.S. taxpayers.”

Dick Armey, former majority leader of the U.S. House of Representatives, chairs FreedomWorks, which is also backed by former presidential candidate Steve Forbes.

The legislation now moves on to the full Senate for a vote.