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Significant Events Leading to the Passage of H.R. 3221, The Housing and Recovery Act of 2008
August 11, 2008
In August 2007, sixty-five mayors signed a letter urging the Federal Reserve Board to use its authority under HOEPA to address the predatory abuses leading to a subprime mortgage crisis. Letter was recommended policy coming through the Community Development and Housing Committee and adopted at the 75th Annual U.S. Conference of Mayors meeting held in Los Angeles in June 2007. Conference of Mayors President Trenton Mayor Douglas H. Palmer is interviewed by several media outlets on the concern of cities about the issue following the release of the letter.
In November 2007, Detroit Mayor Kwame M. Kilpatrick hosts a meeting of the Conference of Mayors Council on Investment in the New American City. Meeting is attended by mayors, bankers, and nonprofits to pursue strategies to address the subprime mortgage crisis. A metro economies report is released showing the negative economic impact of the subprime mortgage crisis on cities. During this meeting, mayors repeatedly raised the question and expressed their concern of vacant and abandoned properties that would be the result of mortgage foreclosures. Meeting received widespread national media.
During the Conference of Mayors Winter Meeting in January 2008, Palmer and Conference of Mayors CEO and Executive Director Tom Cochran pursue a thorough overview and action plan to address the mortgage crisis. The issue is discussed in the Community Development and Housing Committee, the Council for the New American City, and the task force on Vacant and Abandoned Properties. In addition, a special plenary session was devoted to the mortgage foreclosure issue. Coming out of the Winter Meeting, mayors called for several federal government responses to the crisis including an increase in mortgage revenue bonds and Community Development Block Grant (CDBG) funds targeted to localities faced with mortgage foreclosure problems.
On February 14, Senators Harry Reid (NV) and Richard Durbin (IL) introduced bill, S. 2636, the Foreclosure Prevention Act, that would provide $4 billion in CDBG funds for purchase and rehab of foreclosed properties, and also allow housing finance agencies to issue up to $10 billion in mortgage revenue bonds. The legislation would increase pre-foreclosure counseling funds to $200 million and change the bankruptcy code to allow judges to modify mortgages of families faced with mortgage foreclosure.
On February 28, S.2636 failed when it did not get the required 60 votes; the cloture vote was defeated 48-46.
On March 7, Southfield (MI) Mayor Brenda Lawrence testified before the Oversight and Government Reform Committee of the U.S. House of Representatives on the subprime mortgage crisis and how the crisis had impacted her city.
On April 2, the Senate reached a bipartisan agreement on housing legislation that would include $4 billion in supplemental CDBG funds targeted to the mortgage foreclosure crisis. Specifically, the bill H.R. 3221 (formerly S.2636) the Mortgage Foreclosure Prevention Act of 2008, would provide CDBG funds to “purchase foreclosed homes, at a discount, and rehabilitate or redevelop the homes to stabilize neighborhoods and stem significant losses in house values of neighboring homes.”
On April 9, the mortgage crisis became worse and the Administration, which in August 2007 had modified FHA’s refinancing program to help credit homeowners who had missed payment, announced additional mortgage assistance for subprime borrowers. FHASecure will now expand its eligibility standards to include borrowers who had missed as many as two to three consecutive monthly mortgage payments or at two to three different times over the previous twelve months. The Administration says that this expansion would make it possible for FHASecure to help half a million homeowners stay in their homes by cutting mortgage payments.
On April 10, The Senate by a vote of 84-12 passed H.R. 3221, the “Foreclosure Prevention Act of 2008”
On April 10, the Washington (DC) Mayor Adrian M. Fenty, Boston Mayor Thomas M. Menino, and Las Vegas Mayor Oscar B. Goodman testified on Representative Barney Frank’s bill that would allow the Federal Housing Administration (FHA) to insure refinanced mortgages of troubled homeowners that have been significantly written down by mortgage holders and lenders. FHA would be permitted up to $300 billion in new guarantees. Former Baltimore Mayor and now Governor of Maryland Martin O’Malley also testified. The mayors stressed that any financial relief to cities should be funded directly using the CDBG program distribution with 70 percent of the funds to localities and 30 percent to states.
On May 8, the U.S. House of Representatives passed a comprehensive housing bill in a series of amendments to the Senate passed Foreclosure Prevention Act of 2008, H.R. 3221. The amendments to the bill as adopted by the House were packaged as the American Housing Rescue and Foreclosure Prevention Act. The bill passed by a vote of 266-154, with the following amendments:
The FHA Housing and Stabilization and Homeownership Retention Act (H.R.5830) –provides mortgage refinancing assistance to keep families from losing their homes, protect neighboring home values, and help stabilize the housing market.
FHA Modernization (H.R. 1852) had already passed the House in September as the Expanding American Homeownership Act of 2007. This legislation reforms FHA (called for by the Conference of Mayors) will expand mortgage loans for families.
GSE Reform or the Federal Housing Finance Reform Act of 2007 (H.R. 1427) strengthens the regulation of government sponsored enterprises Fannie Mae and Freddie Mac. Legislation also authorizes a new Fund to increase the nation’s stock of affordable rental housing, which is strongly supported by the Conference of Mayors.
The Emergency Mortgage Loan Modification Act of 2008 (H.R. 5579) would protect servicers from the threat of lawsuits from investors when the servicers modify troubled mortgages.
The Housing Assistance Act of 2008 (H.R. 5720) provides a temporary increase to the low-income housing tax credit, helps returning soldiers avoid foreclosure, gives first-time homebuyers a refundable tax credit, and makes available a $10 billion in mortgage revenue bonds.
An amendment by Representative Brad Miller (NC) and Steven LaTourette (OH) protects the rights of states and cities to regulate the foreclosure process and the treatment of foreclosed property.
On May 20, the Senate Committee on Banking, Housing, and Urban Affairs passed “The Federal Housing Finance Regulatory Reform Act of 2008.” Chairman Senator Chris Dodd (CT) and Ranking Member Senator Richard Shelby (AL) in a bipartisan agreement said that the legislation will “help prevent the rising number of foreclosures, create more affordable housing, and reform the regulation of the government'sponsored enterprises (GSEs) in order to improve their role in the housing finance system.” The GSEs are Freddie Mac and Fannie Mae. The legislation passed by a vote of 19-2.
Included in the bill is a provision that establishes a permanent Housing Trust Fund. The provision, championed by Senator Jack Reed (RI), was included in a manager’s amendment offered by Dodd. Reed had originally put forth a proposal for an affordable housing fund that would have been funded by GSE funds only, but agreed to a change that creates a permanent Housing Trust Fund with monies from the GSEs and other funds designated by Congress. Seventy-five percent of the trust funds would go to extremely low-income families.
On July 11, the full Senate passed the Housing and Economic Recovery Act, H.R. 3221 with the $4 billion CDBG program for vacant properties and sends the measure back to the House. The White House, which has threatened to veto the bill because of the $4 billion, does not relent.
Newly elected Conference of Mayors President Miami Mayor Manny A. Diaz warns the White House not to veto the housing legislation during a news conference in Miami.
During this time, the stock values of Fannie Mae and Freddie Mac dropped. The White House is concerned and Treasury Secretary Henry Paulson develops a plan to shore up Fannie and Freddie.
The House includes the Paulson proposal in H.R. 3221 and convinces the White House to withdraw its veto threat.
On July 23, the House passes H.R. 3221, by a vote of 272-152, and sends the bill back to the Senate.
On July 26, the Senate passes the bill by a vote of 72-13.
On July 30, President George W. Bush signs H.R. 3221 into law.
On July 30, Diaz commends the President for signing the bill, and offers the support of mayors in implementing it.
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