House Committee Hold Second Hearing - "Using FHA for Housing Stabilization and Homeownership Retention"
April 11, 2008
The legislative proposal, which Mr. Frank outlined in a March 14 press conference with Senator Dodd, seeks to stem the significant rise in mortgage foreclosures by allowing the Federal Housing Administration (FHA) to insure refinanced mortgages that have been significantly written down by mortgage holders and lenders. In addition, the bill will allow for the bulk refinance and guarantee troubled loans and provide loans and grants to communities to purchase and return to occupancy vacant foreclosed homes. A detailed summary and the legislative text can be found on the Financial Services Committee website at http://financialservices.house.gov/FHA.html. The bill contains three main parts:
- Permits FHA to provide [up to $300 billion] in new guarantees that would help to refinance at-risk borrowers into viable mortgages. In exchange for the agreeing to a substantial write-down of principal, the existing lender or mortgage holder would receive a short payment from the proceeds of a new FHA guaranteed loan if the restructured loan would result in terms that the borrower can reasonably be expected to pay. The existing lender or mortgage holder no further credit exposure to the borrower. This could potentially refinance between 1 and 2 million loans (and help these families stay in their homes), protect neighborhoods and help stabilize the housing market.
- Permits the loan program to be used to refinance and guarantee mortgages through a facility that would provide for auction or other mechanism to refinance loans on a bulk basis.
- Provides $10 billion in loans and grants for the purchase and rehabilitation of vacant, foreclosed homes with the goal of occupying them as soon as possible.
More details are available at http://financialservices.house.gov/FHA.html
Witness List & Prepared Testimony:
- The Honorable Martin O’Malley, Governor, State of Maryland
- The Honorable Adrian M. Fenty, Mayor, District of Columbia
- The Honorable Thomas M. Menino, Mayor, City of Boston
- The Honorable Oscar B. Goodman, Mayor, City of Las Vegas
- Mr. Doug Garver, Executive Director, Ohio Housing Finance Agency
- Mr. David C. Lizarraga, Chairman, US Hispanic Chamber of Commerce
- Ms. Sheila Crowley, President, National Low Income Housing Coalition
- Mr. Hilary O. Shelton, Director, NAACP Washington Bureau
- Mr. Victor Burrola, Director, Homeownership Network, National Council of La Raza