One of the provisions of the Housing and Economic Recovery Act of 2008 is to provide funding for programs approved by the Department of Housing and Urban Development (HUD) to increase the financial knowledge and decision making capabilities of prospective homebuyers.

   The programs will be designed to help people learn to establish monthly budgets, build personal savings for major purchases, reduce debt, implement financial stability and teach people to set and reach financial goals. 

   Additionally these programs will be designed to help people understand their credit scores and the relationship between credit history and credit scores.  Building savings for long term and/or short term goals is also an objective.

   Grants will be distributed for approved programs.  Documented behavioral changes in savings and spending patterns must be evident.  Additionally, five pilot programs will be authorized and tracked for effectiveness.

   The legislation also provides for some people working within HUD to transfer to the Federal Housing Finance Agency without loss of pay, status or tenure.  All benefits are to be equivalent between the two agencies.

    The Director will establish the amount of critical capital necessary for the Home Loan Banks.  Capital requirements will be established by the Director for adequately capitalized banks, undercapitalized banks, significantly undercapitalized banks and critically undercapitalized banks.  The capital reserves of the banks will be monitored and remedies established for those banks failing to meet the requirements.  Supervisory actions are spelled out including conservatorship and ultimately receivership for critically undercapitalized banks.

    Provisions for claims, disposition of assets, notification of potential claimants, and the legal procedures to be followed are delineated in the legislation. 

     Title II concerns the Federal Home Loan Banks whose job is to provide liquidity to member banks, encourage affordable housing and community development, and provide a capital structure.  Semi annual reporting to Congress by the Director regarding these objectives is mandated.

     The legislation abolishes the Office of Federal Housing Enterprise Oversight of the Department of Housing and Urban Development and tranfers many of these objectives to the Federal Housing Fianance Agency.   As with other areas of HUD where employees will be transferred, status, pay, and benefits will not be impacted.

http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:h3221eas2.pdf

Next- HOPE for Homeowners, S.A.F.E. Mortgage Licensing Act, and Foreclosure Prevention

Related Stories Today:

Fannie Mae and Freddie Mac In the News

http://www.investors.com/editorial/IBDArticles.asp?artsec=5&issue=20080806

http://www.investors.com/breakingnews.asp?journalid=78208990&brk=1

    Congress passed the “Housing and Economic Recovery Act of 2008” and President Bush signed the legislation July 30, 2008. The bill, which can be read in it’s entirety at

  http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:h3221eas2.pdf

  establishes the Federal Housing Finance Agency.

       The newly created agency is an independent agency of the Federal Government with authority over the Federal National Mortgage Agency (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal Home Loan Banks and Office of Finance.  The Director will be selected by the President with the consent of the Senate and serve for a five year term.

     A Federal Housing Oversight Board is created consisting of the Secretary of the Treasury, the  Secretary of the Department of Housing and Urban Development, the Chairman of the Securities and Exchange Commission, as well as the Director.  The Board reports to Congress not less than once every three months.   An Ombudsman will be appointed by the Director to hear complaints and appeals.

     Oversight guidelines and standards will be created by the new Agency including regulation of capital requirements, portfolio monitoring, reporting fraudulent loans, compensation, and golden parachutes. 

    Section 1124 increases the Fannie Mae and Freddie Mac conforming loan limits to $417,000 for a single family home, $533,850 for a two family home, $645,300 for a three family home and $801,950 for a four family home.

    Each year, housing prices will be adjusted according to an index determined by the Director of the Federal Housing Finance Agency.  If the index shows a decrease in value, no adjustment will be made. 

   In areas of higher property values, the amount will be adjusted to the lesser of 150% of the limit or an amount equal to the median price of that type of housing within that area. 

   The annual housing price index will be determined by annual housing reports which contain; demographic information, types of loans, creditworthiness of borrowers, loan to value ratios including second liens, race, gender, income levels, underserved markets,  and the purchase price of the property.  Comparision of characteristics of all loans including sub prime and jumbo loans will be included.

    The Director will report by October 30 the the Committee on Banking, Housing and Urban Affairs in the Senate and the Committe on Financial Services in the House to apprise legislators as to how Fannie Mae, Freddie Mac, the federal home banks and the Office of Finance are achieving the goals set forth by the housing goals of this legislation.

    http://www.fanniemae.com

    http://www.freddiemac.com/

Next:  Housing Goals- Low Income, Very Low Income, Families residing in Low Income Areas