Senate Approves Housing Bill, New Regulations Discussed by the Administration

After parliamentary maneuvers delayed passage for weeks, the Senate late last week sent its approved version of the housing bill to the House of Representatives. This sets up the next round of negotiations on the measure, which is expected to be approved by both bodies by the end of the month. While President Bush has suggested he will veto such a measure, legislators in the House and the Senate are pressing to craft a bill acceptable to all.

Housing stimulus and foreclosure relief are the focus of the bill and it is clear that official Washington is paying attention to the calls from constituents, consumers and industry to address the worst housing and finance crisis in decades. The Senate bill, H.R. 3221, contains provisions for foreclosure relief designed to rescue up to 400,000 families by allowing them to refinance into more affordable loans. The Federal Housing Administration would be given authority to insure up to $300 billion in new loans, a part of the measure considered controversial by many as too expensive. This is one of the measures that postponed passage until after the Independence Day break.

Other provisions contain housing related tax breaks and credits for first-time homebuyers, clearly an effort to stimulate the sagging housing market. There is also funding for local communities to purchase foreclosed properties to stem blighted areas. Fannie Mae and Freddie Mac are given higher loans limits to $625,000, although the House is pushing for higher limits in its version of the bill up to $730,000.

All of this comes as home values and confidence continue to slip and the nation’s economy sputters along with rising fuel and commodities prices causing real concern. As I have said before in this column, consumer and investor confidence is a central key to resolving this mortgage and financial crisis. Last week there were signs that restoring confidence may finally be getting more attention.

Policy makers in Washington have begun to talk in terms of needing to know a true, independently derived appraisal documenting the collateral value and making sure the regulatory process is in place to do what is necessary in today’s complicated financial marketplace. At a Congressional hearing both Treasury secretary Henry Paulson and Federal Reserve chairman Ben Bernanke called for legislation and regulatory reform to prevent a future financial crisis. Their suggestions include authority in a new regulator to fill in the gap created by today’s complicated and exotic financing. And while it will be up to the next president and the next Congress to address this in full, the discussion has begun in earnest. Also in Washington last week, the FDIC held a conference on low-and moderate-income lending issues and panelists attested to the need for an appraisal process that is accountable with quality, independent appraisals being a high priority.

Music to my ears, as I have worked through the kind of financial institution crisis we face in the past and I know that re-valuing the collateral to today’s market value, and strengthening appraisal policies are required and important steps toward restoring consumer and investor confidence. Sheila Bair, chairman of the FDIC, is a believer in quality appraisals and knows the necessity of knowing the true value of the underlying collateral for a loan. Her office sponsored the FDIC forum and we are likely to hear more from her as the discussions for additional regulatory authority unfold in the coming months.

Stay tuned as we continue to work though these trying times.

Thomas J. Inserra is the CEO of Zaio Corp