Power And Dollar

Senate Banking Cmt: Mortgage Bill on Thursday

Senate Banking Committee Chairman Chris Dodd (D-Conn.) yesterday said that his panel on Thursday will consider a draft housing bill that would allow the Federal Housing Administration to insure up to $300 billion in refinanced mortgages, and create a new regulator for Fannie Mae, Freddie Mac and the Federal Home Loan Banks. Under the legislation, lenders would, among other things, volunteer to substantially reduce the amount of the original mortgage note. In exchange, the FHA would insure a new loan at a 30-year fixed rate that the borrower could afford. The House last week passed a housing package with some similar measures.

This is not the version of Treasury Secretary Henry Paulson. 

This plan is more consumer-centric than that of Henry Paulson, although improvements can still be made.  For instance, the mortgage write-down has to be initiated by the lender in this version.  For that reason, the lenders have the strongest incentive to unload the riskiest mortgages first.  However, the riskiest mortgages may not be the neediest. 

This riskiness may be perceived as loan by asset.  The lender may also see that as mortgage payment by burrower’s income.  However, the most desperate burrowers usually would see the need as payment by income.

Burrower’s consent is not needed.  The house has to be owner occupied.  The gov’t will also own part of the house’s equity (proceed upon sale).

Bush has threatened veto this legislation.

 

The text can be found in the Banking panel of the Senate website.

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May 13, 2008 - Posted by | banking, business, Current Events, economics, Investment, law, legislation, market, Money, politics, Regulation, wordpress-political-blogs

1 Comment »

  1. […] Eric Earling wrote an interesting post today onHere’s a quick excerpt Senate Banking Committee Chairman Chris Dodd (D-Conn.) yesterday said that his panel on Thursday will consider a draft housing bill that would allow the Federal Housing Administration to insure up to $300 billion in refinanced mortgages, and create a new regulator for Fannie Mae, Freddie Mac and the Federal Home Loan Banks. Under the legislation, lenders would, among other things, volunteer to substantially reduce the amount of the original mortgage note. In exchange, the FHA would insure a ne […]

    Pingback by Politics in America » Senate Banking Cmt: Mortgage Bill on Thursday | May 13, 2008 | Reply


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