On July 30, 2008, President Bush signed the Housing and Economic Recovery Act (HERA), a bill that overhauls the U.S. housing finance system. The legislation contains a mix of short-term, emergency measures designed to ameliorate the current mortgage-market woes and long-term, reform measures meant to prevent such problems from recurring. The 260- page bill will affect many procedures currently used by lenders and loan originators. Some of the more significant short-term measures include:
- temporary authority for the U.S. Treasury Department to serve as a backstop for Freddie Mac, Fannie Mae, and the Federal Home Loan Banks (FHLBs);
- authority for the FHLBs and the Federal Housing Administration (FHA) to use a portion of their funds to refinance mortgages for borrowers at risk of foreclosure; and
- funding for emergency assistance and housing counseling.
The long-term measures, which are designed to address the structural problems in the housing finance system include:
- the creation of a new oversight agency—the Federal Housing Finance Agency (FHFA)— with broad supervisory and regulatory powers over Freddie Mac, Fannie Mae, and the FHLBs;
- the establishment of minimum standards for a nationwide mortgage licensing and registration system for mortgage originators;
- the establishment of enhanced mortgage disclosures to consumers, particularly regarding variable rate loans; and
- various tax-related provisions designed to reduce the existing stock of unoccupied housing and to aid persons seeking low-income housing.
Proponents of HERA hope the legislation will stabilize the housing market and help to curb the number of homeowners facing foreclosure.
We will be studying the provisions of this new law in depth to inform you about how this bill will affect your business or provide new opportunities.
For more information about this law, contact Nancy Leary Haggerty in our Land & Resources Practice Group at firstname.lastname@example.org, or W. Charles Jackson in our Business Practice Group at email@example.com.