Mortgage Reform/Foreclosures/
GSE Reform

In light of record foreclosure rates, mostly in the subprime mortgage market, there are many housing- related initiatives being considered both in the regulatory and legislative arenas.  Anti-predatory lending initiatives, bankruptcy cramdown legislation and FHA expansion to refinance troubled loans are among the many options being considered.  The GBA is all too familiar with the shortcomings that can occur in the marketplace with flawed mortgage-related legislation after experiencing the fallout from the 2002 Georgia Fair Lending Act debacle.  We would advocate a very slow approach when developing legislation on the subject.  Multiple unintended consequences can occur, including problems in the secondary mortgage market which is critical in the mortgage lending process. 

Please keep in mind, also, that the traditional banks and thrifts had little to do with creating the current problems and they will most likely be the institutions best able to help return stability to the mortgage markets.  However, a vibrant, competitive market must be in place.  Bankers’ greatest fear, however, is that Congress will overreact and pass legislation that creates an entirely new regulatory burden on an industry that is already overburdened.

The House of Representatives has already passed H.R. 2312 by Rep. Barney Frank (D-MA).  While the original bill was altered considerably and focuses on the largely unexamined mortgage brokers, there are problematic provisions including a significant expansion of the definition of “high cost” mortgages.  The Senate is currently considering a bill, the Housing and Economic Recovery Act, that if negotiated with all interested congressional parties, could become what is ultimately agreed upon by the entire Congress. 

Please click here for a summary of this legislation that would strengthen the housing Government Sponsored Enterprisess (GSEs - Fannie Mae, Fredie Mac and Federal Home Loan Banks) through expansion of their housing mission with a new, independent regulator and modernize the Federal Housing Administration.

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