The Senate has approved legislation that’s intended to revive the little-used Hope for Homeowners FHA refinance program by providing incentive payments to loan servicers and originators.
S 896, the Helping Families Save Their Homes Act, would also create a legal "safe harbor" for loan servicers who modify loans, protecting them from lawsuits by investors in mortgage-backed securities.
Loan refinancings and modifications are at the heart of the Obama administration’s "Making Home Affordable" plan, which seeks to help 9 million distressed homeowners avoid foreclosure.
The older Hope for Homeowners loan refinance program, which was supposed to help 400,000 borrowers refinance into more affordable loans by late 2011, has done little business since kicking off in October.
Borrowers who hope to refinance into one of the program’s FHA-guaranteed loans can do so only if their existing lender agrees to write down their loan principal. The Hope for Homeowners program will only back loans equal to 90 percent of a home’s current appraised value.
S 896 would lower program fees, streamline borrower certification requirements, and allow the secretary of Housing and Urban Development to make incentive payments to loan servicers and originators who participate in the program.
Other provisions of the bill include:
- $130 million for foreclosure-prevention efforts such as counseling and the hiring of fair-housing field employees.
- Foreclosure protections for renters living in foreclosed homes providing 90 days’ notice.
- A $2.2 billion authorization for homeless programs.
The Senate passed the bill in a 91-5 vote Wednesday.
The House approved its version of the bill, HR 1106, on March 5 in a 234-191 vote. That version of the bill would also have allowed bankruptcy judges to modify mortgages to keep homeowners out of foreclosure (see story).
Lending industry opponents who argued the controversial "cram down" provision would raise the cost of mortgage loans for all borrowers prevailed in a previous Senate vote. In a 45-51 vote, the Senate on April 30 rejected an amendment to S 896 that would have given bankruptcy judges more limited cram-down powers.
Differences between HR 1106 and S 896 must now be ironed out in a conference committee. Speaker of the House Nancy Pelosi, D-Calif., has reportedly indicated that cram-down language in HR 1106 will be stripped to reflect the Senate vote on the issue.
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