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FHA Mortgage Reform Sails Through Senate Commitee

by Peter G. Miller
May 20th, 2008

The Senate Committee on Banking, Housing and Urban Affairs voted 19-2 to support the The Federal Housing Finance Regulatory Reform Act of 2008.

The measure will allow the FHA to insure as much as $300 billion in new mortgages to replace existing toxic loans — but only for homeowners, not investors, and only if lenders will accept write-downs.

The measure, which was supported by both Senate Banking Committee Chairman Christopher Dodd (D-CT) and Ranking Member Richard Shelby (R-AL), will now go to a conference committee to iron out differences with a House version of the bill.

The lopsided vote in support of the measure was somewhat of a surprise, given White House threats last week to veto the House measure and HUD claims that the House bill was “reckless and costly.”

However, with the loss of a “safe” Republican seat in Mississippi coupled with a new report from RealtyTrac.com showing still-another massive increase in foreclosure levels when compared with a year ago, bi-partisan support for a housing relief bill grew significantly during the past few days.

At the White House, spokesperson Dana Perino said “we are very encouraged that the bill appears to create a strong and independent regulator to ensure the safety and soundness of the GSEs — that’s something that the President has long called for and that we believe is the most significant component of the bill. And we also are looking at the FHA provisions of it; we want to make sure we understand the financing, and we just have some questions and we want to make sure that we go through and carefully deliberate it before we make a decision.”

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