House passes housing-stimulus legislation.

Despite a veto threat from the White House, a Democrat-backed comprehensive legislative package designed to respond to the current mortgage crisis as well as modernize the Federal Housing Administration (FHA) and reform oversight of the government-sponsored enterprises (GSEs) cleared the House of Representatives by a wide margin on May 8.

The American Housing Rescue and Foreclosure Prevention Act (H.R. 3221), which is comprised of a number of housing bills, passed by a 266-154 vote, with just 39 Republicans voting for the bill's passage.

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For its part, the Mortgage Bankers Association (MBA) lauded passage of the omnibus bill. MBA Chairman Kieran Quinn, CMB, noted that the bill contains key elements that MBA supports--including long-sought-after FHA modernization, GSE reform and assistance for troubled homeowners.

"FHA modernization has long been one of MBA's top legislative priorities, and we are extremely pleased to see the legislation included in this bill. Likewise, creating a new regulator for the GSEs is crucial given the current state of the market," Quinn said. "Legislation to allow FHA to assist troubled borrowers has the potential to help a significant number of borrowers avoid foreclosure. We want to ensure there are appropriate safeguards to help those borrowers most deserving while keeping the program voluntary for lenders," he added.

Quinn said MBA also supported a provision that gives tax incentives designed to stabilize the housing market by encouraging consumers to start buying homes again. "By passing this legislation, Congress is giving lenders additional tools to help troubled borrowers stay in their homes as well as helping to prevent future problems for the housing market," he said.

Pushed through by House Financial Services Committee Chairman Barney Frank (D-Massachusetts), H.R. 3221 includes the FHA Housing Stabilization and Homeownership Retention Act (H.R. 5830). Among other things, H.R. 5830 includes $300 billion in new lending authority for FHA and provides $230 million for housing counseling.

"It is important that we reduce the number of foreclosures, both as a matter of alleviating the pain for some individuals and stabilizing some neighborhoods," said Frank. "It is my hope that this legislation will restore some stability to the housing market, put liquidity back in the market and not interfere with the market, but help restore it."

Other aspects of the omnibus bill include:

* H.R. 1852, the Expanding American Homeownership Act of 2007, which was previously passed by the House separately in September, modernizes FHA and increases its ability to back loans for riskier borrowers, and permanently increases the amount per loan that FHA can insure--up to $729,750 in high-cost areas.

* H.R. 1427, the Federal Housing Finance Reform Act of 2007, which strengthens regulation of the GSEs (Fannie Mae, Freddie Mac and the Federal Home Loan Bank System); raises the GSE loan limits for single-family homes, allowing the GSEs to purchase more loans; expands liquidity in the mortgage markets by buying loans already made to free up new money for new mortgages and refinances; and creates a new fund designed to boost the nation's stock of affordable housing.

* H.R. 5579, the Encouraging Mortgage Modifications/Castle Bill, which provides mortgage servicers with clarity and certainty for their actions and protection from investor lawsuits if servicers help families in danger of losing their homes with loan modifications that reduce monthly mortgage payments through lower interest rates, reduced principal amounts or other changes in loan terms.

* H.R. 5720, the Housing Assistance Tax Act of 2008, which provides credits of up to $7,500 for first-time homebuyers, repayable over a 15-year period, and provides an additional $10 billion in mortgage revenue bonds for states and municipalities to improve access to low-income housing.

* An amendment, Preserving the American Dream for Our Nation's Veterans, which increases the Department of Veterans Affairs (VA) home loan limit, as was done in the stimulus package, for high-cost housing areas so that veterans have more homeownership opportunities.

* A measure known as the Miller/LaTourette Amendment, which expands the rights of states and cities to regulate the foreclosure process and the treatment of foreclosed property. However, it would not pre-empt state foreclosure laws for national banks or federally chartered thrifts.

All eyes now fall on the Senate, where Senate Banking Committee Chairman Christopher Dodd (D-Connecticut) is working on counterpart legislation.