Alert July 29, 2008

Senate Passes Housing/GSE Bill

The Senate passed the Housing and Economic Recovery Act of 2008, H.R. 3221, that reforms the regulation of the GSEs, modernizes the FHA, and provides funds for FHA refinancings of distressed loans. The bill’s GSE provisions would create a new combined regulator for Fannie Mae, Freddie Mac and the Federal Home Loan Banks. The bill would also increase Fannie’s and Freddie’s lines of credit with the Treasury Department, allow Treasury to purchase equity in Fannie and Freddie, and give the FRB authority to consult with the new GSE regulator on setting capital standards for the GSEs. In addition, the bill would authorize the FHA to insure up to $300 billion in refinanced mortgages, increase to $625,000 the size of loans Fannie and Freddie may buy in high-cost areas, allocate $3.9 billion to allow state and local governments to buy and repair foreclosed properties, provide $15 billion in housing tax breaks (including a credit of up to $7,500 for first-time homebuyers), offer up to $200 million to foreclosure-prevention programs, and increase the statutory limit on the national debt by $800 billion to $10.6 trillion. The Senate’s action clears the bill for President Bush’s expected signature. Click here for the bill.