WASHINGTON, DC – May 20, 2009 – (RealEstateRama) — U.S. Senator Debbie Stabenow (D-MI) today praised President Obama for signing the Helping Families Save Their Homes Act of 2009 into law. The new law will makes it easier for homeowners and lenders to work together to prevent foreclosures. The legislation passed the Senate earlier this month.
“I am pleased President Obama signed this critical legislation into law at a time when families across our state continue to struggle every day to make their mortgage payment,” said Stabenow. “Too many hard-working homeowners are all ready making great sacrifices to make ends meet and keep their part of the American dream. This new law will help more families keep that dream alive.”
The law also strengthens enforcement against those trying to capitalize on the housing crisis by violating the lending regulations set forth by the Federal Housing Administration (FHA) and the Department of Housing and Urban Development (HUD). In addition, the law enables the Federal Deposit Insurance Corporation (FDIC) to work with community banks to free up additional capital for lending to consumers and small businesses.
Major provisions of the Helping Families Save Their Homes Act include:
• Expands the ability of FHA and Rural Housing to assist homeowners. Authorizes HUD and the USDA to incentivize loan servicers to participate in the Obama loan modification program or otherwise modify the loans in ways that are not presently available to distressed homeowners, including reducing interest rates, reducing principal, or stretching out the term of these government-insured loans. The bill also enables HUD to take more stringent action against lenders that break FHA rules.
• Increases borrowing authority both for the FDIC and the NCUA. Increases permanent borrowing authority for the FDIC and NCUA ($100 b and $6 b respectively) allowing the FDIC and NCUA to increase their reserves. It also establishes temporary additional borrowing authority ($500 b and $30 b respectively), expanding borrowing authority for a set amount of time. FDIC Chairman Bair has said that the temporary borrowing authority will allow the FDIC to reduce the special assessments on banks by as much as 50% resulting in $75 billion in additional lending in our communities.
• Expands Access to the HOPE for Homeowners (H4H) Program. Makes a number of changes to the H4H program to make it more user-friendly and effective, including: lowering fees; streamlining borrower certification requirements; giving the Secretary of HUD limited discretion to determine amount and distribution of future appreciation; banning millionaires from the program; and allowing for incentive payments to servicers and originators to participate in the program.
• Protects loan servicers who modify a loan consistent with the Obama plan or refinance a borrower into a HOPE for Homeowners (H4H) loan from legal action. Even as more and more homeowners have fallen behind on their loans, the response of loan servicers has been inadequate. Loan servicers will no longer be able to claim the threat of legal action prevents action to assist mortgage-holders.
• Authorizes an additional $130 million for foreclosure prevention activities including counseling, additional fair housing field employees, and advertising funds to help prevent people from falling victim to foreclosure scams.
• Extends the $250,000 deposit insurance level for four years. Normally, deposits are insured up to $100,000 per account. However, the Emergency Economic Stabilization Act (EESA) increased coverage to $250,000 through the end of 2009. This legislation extends the higher deposit insurance limit for banks, thrifts, and credit unions to 2013. Raising this limit stimulates deposit activity, aiding the lending ability of community banks.
• Expand time duration for payments of assessments in order to rebuild the bank, thrift, and credit union deposit insurance funds to eight years. By doing so, community banks and credit unions will be able to devote more of their resources to making loans in the communities they serve. This provision is especially important for credit unions that would otherwise have to rebuild their fund in one year, which could lead to a severe reduction in lending.
• Creates a Financial Markets Commission to Examine the Causes and Circumstances that Led to the Current Economic Crisis. The ten member committee comprised of 6 Democratic members and 4 Republican members will examine the international and domestic origins of the financial crisis.
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