Yesterday, the House Financial Services Committee approved three measures that focus on the foreclosure crisis and increasing bank liquidity.
The first measure, H.R. 786, would permanently increase the FDIC insurance limit from $100,000 to $250,000. The deposit limit was initially increased by the Emergency Economic Stabilization Act of 2008 in October, but is set to revert to pre-EESA levels on December 31, 2009.
The second measure, H.R. 787, would significantly revise the Hope for Homeowners Program (H4H), established under the Housing and Economic Recovery Act of 2008. At its inception, H4H was expected to assist, over a three year period, approximately 400,000 homeowners at risk of foreclosure. However, H4H has largely been deemed a failure. In fact, during the Committee’s hearing the day before, Meg Burns of the Department of Housing and Urban Development testified that only 451 H4H applications had been received to date and of those applications only 25 have been approved.
The third measure, H.R. 788, would provide a safe harbor for mortgage servicers who engage in specified mortgage loan modifications. Several other amendments were also adopted by the Committee through a voice vote. Of significance these measures include:
- barring homeowners who make over $1 million per year from participation in H4H;
- increase the FDIC’s borrowing authority from $30 billion to $100 billion; and
- requiring the FDIC to charge rates for systemic risk special assessments to depository bank holding companies and insured depository institutions.
These amendments are expected to be combined with the mortgage bankruptcy legislation into one bill that will likely reach the floor next week.