Late yesterday, President Obama signed two important pieces of legislation, S. 896, the “Helping Families Save Their Homes Act,” and S. 386, the “Fraud Enforcement and Recovery Act of 2009.” In signing both bills, President Obama stated, “[t]hese landmark pieces of legislation will protect hardworking Americans, crackdown on those who seek to take advantage of them, and ensure that the problems that led us into this crisis will never happen again.”

Helping Families Save Their Homes Act

On May 19, 2009, the Senate agreed to the version of S. 896 previously approved by the House. The Act contains significant improvements to the Hope for Homeowners Program that echoes Treasury’s recent additions to the Making Home Affordable Program. Noting the importance of strengthening Hope for Homeowners, President Obama stated "[l]ast summer, Congress passed the HOPE for Homeowners Act to help families who found themselves 'underwater' as a result of declining home values -- families who owed more on their mortgages than their homes are worth. But too many administrative and technical hurdles made it very difficult to navigate, and most borrowers didn't even bother to try. This bill removes those hurdles, getting folks into sustainable and affordable mortgages, and more importantly, keeping them in their homes.”

Among other things, the legislation:

  • Provides protections for renters of foreclosed homes by providing a minimum 90-day notice requirement.
  • Provides $2.2 billion to expand a program that provides assistance for the homeless.
  • Increases the FDIC's borrowing authority to $100 billion and gives the FDIC temporary authority to borrow as much as $500 billion through 2010.
  • Extends through 2013 the temporary increase in the FDIC deposit insurance coverage from $100,000 to $250,000.
  • Increases the National Credit Union Administration borrowing authority to $6 billion and creates a Stabilization Fund.

Notably missing from the Helping Families Save Their Homes Act is the controversial “cramdown” language seen in H.R. 1106 that would have allowed bankruptcy courts to modify the terms of residential mortgages.

Fraud Enforcement and Recovery Act of 2009

On May 14, 2009 the Senate approved, with amendment, the House version of S.386, the Fraud Enforcement and Recovery Act of 2009. The Senate's amendment limits the subpoena power of the ten-member Financial Crisis Inquiry Commission created by the legislation to examine and report, by December 2010, on “the causes, domestic and global, of the current financial and economic crisis in the United States,” including the causes of the collapse of each financial institution that has failed or was rescued during the financial markets crisis. This Commission will have broad power to hold hearings, issue subpoenas and take testimony, but under the Senate amendment the affirmative vote of at least one member of the Commission appointed by the minority leaders of the House and Senate will be required before a subpoena may be issued. The House agreed to the Senate's amendment on May 18, 2009. The final legislation, as signed into law by the President on May 20, 2009.

In addition to the provisions addressing the Financial Crisis Inquiry Commission, the legislation:

  • Authorizes over $290 million over the next two years to the Department of Justice, the FBI, the U.S. Postal Inspection Services, the U.S. Secret Service and the Inspector General for the Department of Housing and Urban Development to hire additional fraud agents, analysts, investigators, prosecutors, and support staff to combat fraud.
  • Defines mortgage lending businesses as “financial institutions” subject to potential liability for, among other things, false statements, bank fraud and bank bribery.
  • Makes significant changes to fraud and money laundering statutes to strengthen prosecutors’ ability to pursue fraud claims by, among other things, amending the criminal money laundering statute to make clear that the proceeds of certain illegal activities include the gross receipts of the illegal activity, and not just the profits of the activity.
  • Amends the False Claims Act to, among other things, eliminate the requirement that a false claim be presented to a federal official, or that it directly involve federal funds.
  • Amends the criminal securities and federal program fraud statutes to cover fraud schemes involving TARP, federal stimulus programs and commodities futures and options.

Prior to signing the bill, President Obama noted the need for action by stating, “Last year, the Treasury Department received 62,000 reports of mortgage fraud -- more than 5,000 each month. The number of criminal mortgage fraud investigations opened by the FBI has more than doubled over the past three years. And yet, the federal government's ability to investigate and prosecute these frauds is severely hindered by outdated laws and a lack of resources."