Yesterday, the Senate passed S. 896, the “Helping Families Save Their Homes Act,” by a vote of 91 to 5. This measure, co-sponsored by Senator Christopher Dodd (D-CT) and Richard Shelby (R-AL), would provide more tools to borrowers and banks to help prevent foreclosures and make it easier for homeowners and loan servicers to use those tools. Commenting on the bill, Senator Dodd stated, “While this bill is not a cure-all for our nation’s economic troubles, it makes important contributions towards the protection of American homeownership and a healthier banking system.” Last month, the House passed a similar measure, H.R. 1106, but the House version contains the controversial bankruptcy “cramdown” provision, which would authorize bankruptcy judges to modify mortgage terms. Last week, the Senate voted down a cramdown amendment and the final Senate version of the bill does not contain a cramdown provision. It remains unclear whether the House will take up this bill, amend it or compromise through conference committee.
Significantly, S. 896 does echo changes the Obama administration called for last week in its announcement of the new features for the “Making Home Affordable” loan modification program. The bill makes the Hope for Homeowners Program (H4H), authorized under last summer’s Housing and Economic Recovery Act, more attractive by lowering program fees, easing borrower certification requirements and streamlining borrower certification requirements. Also, instead of excluding borrowers who have ever intentionally defaulted on their mortgages in the past, this measure would only exclude borrowers who have intentionally defaulted in the past five years.
S.896 would also expand the FDIC’s borrowing authority from $30 billion to $100 billion. It also gives the FDIC the authority to borrow as much as $500 billion through 2010. The measure would also extend through 2013 the temporary increase in FDIC deposit insurance coverage from $100,000 to $250,000.
Among other things, the bill would also do the following:
- Shield mortgage servicers from lawsuits by investors relating to loans that have modified or refinance under federal programs;
- Ease exit requirements for financial institutions receiving TARP funds by removing the requirements to liquidate warrants under TARP;
- Authorize an additional $127.5 million for foreclosure prevention;
- Stretch out the payment of assessments to rebuild the bank, thrift, and credit union deposit insurance fund to eight years;
- Provide protections for renters living in foreclosed homes; and
- Authorize $2.2 billion for homeless programs.