| Regulatory Reform and Other Provisions |
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| GSE Reform |
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The Housing and Economic Recovery Act provided additional regulation and support for two of the nation’s largest corporations, Fannie Mae and Freddie Mac – also known as "government-sponsored enterprises" (GSEs). GSEs are privately owned, but receive support from the Federal Government, and assume some public responsibilities. The GSEs provide a secondary market in home mortgages by purchasing mortgages from the lenders who originate them. They hold some of these mortgages, and some are "securitized" - sold in the form of securities which the GSEs guarantee.
The bill includes a new independent regulator for Fannie Mae and Freddie Mac. The new regulator will monitor the activity of these GSEs – and ensure that loans are underwritten according to strict parameters with additional targets for affordable housing, manufactured parks, and foreclosure refinancing. The new regulator will establish criteria for portfolio holdings of GSEs and establish risk-based capital requirements. Loan limits will also be reviewed and adjusted annually if needed.
The bill established initial loan limits for the GSEs - up to the greater of $417,000 or 115 percent of the local area median home price, capped at $625,500. These limits go into effect December 31, 2008.
The bill allows the US Treasury to back the current debt of the GSEs if they are unable to cover this debt. Although the GSEs may have considerable risk associated with all of the sub-prime lending problems, the Treasury backing will help support the GSEs to continue their major role as secondary buyers of home mortgages.
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| Affordable Housing Trust Fund |
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The bill establishes a national Housing Trust Fund. The fund would provide grants to states to use for:
- Increasing and preserving the supply of rental housing for extremely low and very low-income families, including homeless families.
- Increasing homeownership for extremely low- and very low-income families.
The Housing Trust Fund will receive funding from a small percentage of GSE profits each year. In the first few years, some of the Housing Trust Fund will be diverted to pay for provisions in the Housing Stimulus Bill. After a few years, however, the fund will generate a minimum of $3 million per year for Oregon that can be used to support affordable housing.
OHCS will post more information on this site as Housing Trust Fund projections become available and as OHCS reviews the best uses of these additional federal funds for affordable housing.
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| FHA Reform |
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The creation of the Federal Housing Administration (FHA) has successfully increased the size of the housing market. The FHA provides loans and insures single and multi-family loans throughout the country. FHA mortgage insurance has been especially advantageous to borrowers with poor to low credit scores.
The bill provided additional funds and additional reforms for FHA insurance. A new refinance program was created for lenders to help homebuyers with problematic adjustable rate loans. Lenders can write down qualified mortgages to 85 percent of current appraised value and qualified borrowers would get a new FHA 30 year fixed mortgage at 90 percent of appraised value. Borrowers would have to share 50 percent of all future appreciation with FHA. The loan limit of this refinance program is $550,440.
This program is not available through OHCS. OHCS does not have a refinance program. Lenders in Oregon will need to evaluate this new FHA program as details become available.
The bill established new limits for FHA home loans. The new loan limit is $271,050 or 115 percent of the area median income up to $625,000. Downpayment requirements on these loans were increased from 3 percent to 3.5 percent. These limits go into effect December 31, 2008.
Federal Housing Administration (FHA) Mortgage Assistance
 Fact Sheet
FAQ
(Source: HUD - U.S. Department of Housing and Urban Development)
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