Senate Strengthens Housing Program to Reduce Home Foreclosures
Sen. Carper Helped Forge Compromise Legislation to Keep More Americans in Their Homes
Legislation to help more Americans stay in their homes and avoid foreclosure passed the Senate today by a vote of 93-1, with the strong urging of Sen. Tom Carper (D-Del).
“Delaware homeowners are being hit hard by the dual punch of the sub-prime induced credit crunch and the weak housing market. The federal government can help by strengthening and reauthorizing one of the best tools we have – the Federal Home Administration (FHA),” said Sen. Carper, who helped forge this legislation as a senior member of the Senate Committee on Banking, Housing and Urban Affairs.
“This bipartisan bill will help the many homeowners in Delaware and across the country now facing exploding interest rates by providing greater access to low-cost, government-backed mortgages,” Sen. Carper said. “I hope this bill will help reverse a recent trend of more Americans turning to riskier subprime mortgages and away from safer, government-backed loans available through the FHA.”
The FHA Modernization Act of 2007 (S. 3338) increases the allowable loan limits and decreases down payment requirements for loans backed by the FHA to purchase homes.
The FHA is a self-sufficient agency that provides substantial economic benefits by stimulating home ownership and community development, which strengthens local communities by creating more jobs, boosting building suppliers, and expanding tax bases for schools and other local revenue.
Sen. Carper, who chaired a banking committee hearing last month examining mortgage reforms, stressed that since its formation in 1932, the FHA has set many of the standards now accepted in the mortgage market, including low down-payments and 30-year fixed and pre-payable loans.
“FHA can again become a primary source for working Americans, minorities and first-time homebuyers seeking the American dream of home ownership,” Sen. Carper said. “This compromise bill will bring more Americans back to securing homes loans through the FHA, which has a strong track record of Americans paying their full mortgage on time.”
Highlights of this FHA legislation, which must still be reconciled with a similar House bill, will:
- Increase the FHA loan limit from $362,790 to $417,000.
- Reduce mortgage down payments from 3 to 1.5 percent.
- Remove caps on Home Equity Conversion Mortgage Program, also known as reverse mortgage, to allow seniors to convert home equity into a lump sum or monthly payment
- Create a pre-purchase counseling program.
- Require governments and non-profits to improve the FHA loss mitigation process so that more troubled homeowners can retain their homes.
“This is a good start but only part of a larger process,” said Sen. Carper. “The first part is Treasury Secretary Paulson’s voluntary program to freeze interest rates on adjustable rate subprime mortgages for five years. This FHA bill is the second part. The third part is for the Senate early next year to pass recently introduced legislation to ban predatory lending. And, the fourth and final piece is to strengthen the regulation of the Fannie Mae and Freddie Mac programs, which buy home loans from banks."