Financial Services Committee to Hold April 9 and April 10 Hearing on Economic, Mortgage and Housing Rescue Bill
April 8, 2008
Washington, DC—House Financial Services Committee Chairman Barney Frank announced today the committee will hold a hearing on the economic, mortgage and housing rescue plan he announced last week. The April 9 hearing will include federal regulators, academics, economists and representatives of the cities and communities that are being negatively impacted by high numbers of foreclosures. Witnesses will be asked to discuss the proposal and to provide suggestions to the committee. Mr. Frank has pointed out publicly that we are in uncharted territory in the challenges to our economy, and he has been seeking input from a wide range of experts on this subject. This hearing is a part of that process.
The legislative proposal, which Mr. Frank outlined in a March 14 press conference with Senator Dodd, seeks to stem the significant rise in mortgage foreclosures by allowing the Federal Housing Administration (FHA) to insure refinanced mortgages that have been significantly written down by mortgage holders and lenders. In addition, the bill will allow for the bulk refinance and guarantee troubled loans and provide loans and grants to communities to purchase and return to occupancy vacant foreclosed homes. A detailed summary and the legislative text can be found on the Financial Services Committee website at http://financialservices.house.gov/FHA.html. The bill contains three main parts:
- Permits FHA to provide [up to $300 billion] in new guarantees that would help to refinance at-risk borrowers into viable mortgages. In exchange for the agreeing to a substantial write-down of principal, the existing lender or mortgage holder would receive a short payment from the proceeds of a new FHA guaranteed loan if the restructured loan would result in terms that the borrower can reasonably be expected to pay. The existing lender or mortgage holder no further credit exposure to the borrower. This could potentially refinance between 1 and 2 million loans (and help these families stay in their homes), protect neighborhoods and help stabilize the housing market.
- Permits the loan program to be used to refinance and guarantee mortgages through a facility that would provide for auction or other mechanism to refinance loans on a bulk basis.
- Provides $10 billion in loans and grants for the purchase and rehabilitation of vacant, foreclosed homes with the goal of occupying them as soon as possible.