Compliance & Regulation

The Senate has approved a $15,000 homebuyer tax credit that the homebuilders and Realtors have been pushing for to stimulate sales and soak up the excess inventory of unsold houses. The Senate approved and added the tax credit amendment by Sen. Johnny Isakson, R-Ga., to the economic stimulus bill by a voice vote. The Isakson amendment expands an existing $7,500 homebuyer tax credit to $15,000, or 10% of the purchase price, whichever is less. And it makes the tax credit available to all homebuyers. The House has passed a $7,500 tax credit that is limited to first-time homebuyers. In the 1970's, the government successfully employed homebuyer tax credits to get the economy out of a serious housing down turn, according to Sen. Isakson. "We have a pervasive housing problem, and we have a historical precedent that works. I am proud this Senate has joined together, learned from history and repeated a method that worked by adopting this amendment," he said. Sen. Patty Murray, D-Wash., is expected to offer an amendment that raises the maximum loan limit on Fannie Mae, Freddie Mac and FHA loans back to $729,750 for the rest of this calendar year. The House-passed economic stimulus bill has a similar loan limit provision.

The House Financial Services Committee approved three bills that could be merged into a bankruptcy cramdown bill the House might vote on soon. The three bills would revamp the Federal Housing Administration Hope for Homeowners refinancing program, protect servicers that modify mortgages from investor lawsuits and strengthen the Federal Deposit Insurance Corp. Committee chairman Barney Frank, D-Mass., told this newspaper the three bills could become part of the bankruptcy package House leaders want to pass. The mortgage industry continues to oppose the bankruptcy bill that recently cleared the House Judiciary Committee by a party-line vote of 21-15. Industry lobbyists are sure there are not enough votes in the House to pass the bankruptcy bill (H.R. 200) as a stand-alone measure. By packaging H.R. 200 with the FDIC bill that makes the temporary hike in the deposit insurance limit to $250,000 permanent, the legislation could garner more support.

Senate Republicans want to attach several housing amendments to an economic stimulus bill that would expand a homebuyer tax credit and create an interest rate buydown program that would reduce mortgage rates to 4%. "We must stabilize home values if we are going to reverse this deep and precipitous slide in our economy," said Sen. John McCain, R-Ariz. The mortgage rate buydown program would stimulate home sales and soak up excess inventory, according to Sen. John Ensign, R-Nev. It also would help 40 million creditworthy homeowners save $400 per month, the Nevada senator said. "This is like a permanent tax cut, which economists believe is the best stimulus for our economy," he said. Republicans also are proposing to expand a $7,500 first-time homebuyer tax credit to $15,000 or 10% of the purchase price that would be available to all buyers. The tax credit could be used in one year or spread out over two years. To facilitate loan modifications, the Republicans want to shield servicers from investor lawsuits. The amendments also would change a one-time $1,000 fee for loan modifications to $60 a month over the life of the loan.

House Financial Services Committee chairman Barney Frank, D-Mass., might attach his bill to revamp the Federal Housing Administration's Hope for Homeowners program to a bankruptcy mortgage cramdown bill that is making its way to the House floor soon. "Bankruptcy is not a fun thing for anyone. So I want to have a series of alternatives to bankruptcy," Rep. Frank told reporters. The Hope for Homeowners bill (H.R. 703) would make the FHA program more effective in restructuring underwater mortgages. The original bill also contained a safe harbor provision to shield servicers that modify loans from investor lawsuits and provisions to strengthen the Federal Deposit Insurance Corp. But Rep. Frank has divided H.R. 703 into three separate bills so they can be attached to other related legislation. Rep. Frank also might attach the safe harbor provision to the bankruptcy bill.

The Mortgage Bankers Association Tuesday afternoon asked Congress to provide short-term government guarantees on warehouse lines of credit to address what it believes is a liquidity crisis facing non-depository residential funders. The trade group also thinks it might be a good idea to allow Fannie Mae and Freddie Mac to buy participations in warehouse lines of credit, a move it thinks will add liquidity to the sector. In years past mortgage bankers -- and warehouse executives -- were adamantly opposed to allowing the GSEs to get anywhere near the warehouse niche. MBA claims warehouse lending capacity has shrunk to just $25 billion or so compared to $200 billion two years ago. "This sub-crisis is the result of a shortage of warehouse lines of credit, meaning independent mortgage bankers are doubly hamstrung to originate new mortgages threatening their viability," said MBA chief John Courson in written testimony before the House Financial Services Committee. According to exclusive survey figures compiled by National Mortgage News, there are just 10 or so active warehouse lenders compared to 30 two years ago. Many warehouse providers have either failed or closed down that line of business including most of the Wall Street firms that played in the space. Active warehouse firms include Horizon Bank, Flagstar, GMAC-RFC, National City, and a few others. MBA wants the government to provide federal guarantees on warehouse lines for 12 to 24 months -- but only on Fannie Mae, Freddie Mac and government-backed loans, which currently accounts for most of the market.

Senate Republicans want to attach several housing amendments to an economic stimulus bill that would expand a homebuyer tax credit and create an interest rate buydown program that would reduce mortgage rates to 4%. "We must stabilize home values if we are going to reverse this deep and precipitous slide in our economy," said Sen. John McCain, R-Ariz. The mortgage rate buydown program would stimulate home sales and soak up excess inventory, according to Sen. John Ensign, R-Nev. It would also help 40 million creditworthy homeowners save $400 per month, the Nevada senator said. "This is like a permanent tax cut, which economists believe is the best stimulus for our economy." Republicans also are proposing to expand a $7,500 first-time homebuyer tax credit to $15,000 or 10% of the purchase price that would be available to all buyers. The tax credit could be used in one year or spread out over two years. To facilitate loan modifications, the Republicans want to shield servicers from investor lawsuits. The amendments also would change a one-time $1,000 fee for loan modifications to $60 a month over the life of the loan.

AllRegs, Eagan, Minn., has created a new certification program for residential mortgage underwriters of government loans. The program is offered through AllRegs Academy and will give participants the designation of Residential Government Underwriter. Those seeking the designation must have two years experience in the mortgage industry, with an emphasis in underwriting, processing, government lending, risk analysis or quality assurance. They also must complete 12 hours of education with a passing score of 75% or above and pass an examination. The coursework includes underwriting, appraisal and compliance programs; Federal Housing Administration and Veteran's Administration underwriting courses; and courses in the USDA's Rural Housing program. Once certified, designees must renew their RGU every two years by successfully completing approved education courses.

Banks have significantly tightened their underwriting standards on commercial real estate loans since the shutdown of the commercial mortgage-backed securities market last year, but the shutdown has not hurt loan volume, according to a Federal Reserve Board survey of senior loan officers. Only seven out of 53 U.S. banks reported a reduction in CRE lending during the second half of 2008. "About 30% indicated the shutdown of the CMBS securitization market had led to an increase in CRE lending," the Fed said in a summary of the responses to its January survey. About 95% of the surveyed banks said they increased their loan-rate spreads on CRE loans, 80% tightened their loan-to-value ratios and 70% tightened their debt-service ratios. Meanwhile, 45% of the 51 banks engaged in residential mortgage lending said they have tightened their lending standards on prime loans over the past three months. Only 10% reported weaker demand for prime loans, compared to 50% in the October survey.

President Barack Obama has nominated the county executive of King County, Wash., Ron Sims, to be the deputy secretary and second in command at the Department of Housing and Urban Development. If approved by the U.S. Senate, Mr. Sims will be in charge of the department's day-to-day operations. HUD secretary Shaun Donovan said Mr. Sims' past experience as the leader of a large urban governmental entity as well as his innovative approaches and collaborative problem solving should serve him well in his new post.

Citigroup, New York, said it authorized the use of $25.7 billion of Troubled Asset Relief Program Funds for its residential mortgage activities in the fourth quarter 2008 but only an undisclosed portion of the money was spent during that period. That is by far the biggest chunk of the $36.5 billion of TARP money authorized for use during that period. The company said it made $75 billion in new loans of all types during the fourth quarter. The report also covered Citi's activities with troubled residential mortgage borrowers. The company said it has worked with approximately 440,000 homeowners whose mortgages totaled $43 billion since the start of the housing crisis in an effort to prevent foreclosure. In 2008, Citi said it kept approximately four out of five distressed borrowers whose loans it serviced in their homes. Citi said it is adopting the streamlined model for post-delinquency modification programs developed by the Federal Deposit Insurance Corp. In addition, through the Citi Homeowner Assistance Program, it is reaching out to those who may be experiencing some form of economic distress although they are current on their mortgage payments.