Government

A Sacramento, California citizen has proposed an amendment to the California Constitution that would outlaw foreclosures. On claims that lending institutions have failed to provide a simple method of foreclosure prevention, David A. Benson's Foreclosure Modification Act would require lenders to provide principal reductions and interest rate reductions to help borrowers keep their homes. His proposal has already been cleared by the Secretary of State and now requires 807,615 signatures to make it onto the ballot.

At a Senate subcommittee hearing Tuesday, industry leaders voiced opinions on the creation of national mortgage servicing standards. While there was support for such a move on the grounds that it would protect homeowners and improve customer experience, witnesses expressed a variety of concerns, including the possibility of further complicating already complex standards from a variety of authorities; creating undue hardships for community banks; and negatively impacting responsible homeowners.

The Federal Housing Finance Agency (FHFA) filed a lawsuit last week in a New York federal court against UBS Americas, Inc. for violations of federal securities laws related to UBS' sale of $4.5 billion in private-label residential mortgage-backed securities to Fannie Mae and Freddie Mac. The lawsuit alleges that UBS Americas made material misstatements and omissions about the mortgage loans underlying the bonds. Fannie and Freddie claim they have already lost in excess of 20 percent of their entire investment.

The House Financial Services Committee is considering a bill to ease the pressure that unsold inventories of vacant, foreclosed homes are putting on the housing market. The Neighborhood Preservation Act would authorize FDIC-member banks, Fannie Mae, and Freddie Mac to enter into five-year lease agreements to rent REO properties back to the foreclosed homeowner. News surfaced last month that the administration was considering such a policy for Fannie and Freddie, but a group of bipartisan U.S. representatives want to enact it with legislation.

Federal and state regulators shut down three more community-based lenders over the weekend in Indiana, South Carolina, and Virginia. With this latest round of closings, the FDIC's failed-bank list has grown to 61 for the 2011 calendar year. Integra Bank, N.A. in Evansville, Indiana, was the largest of this weekend's seizures, with 52 branches, $1.9 billion in deposits, and assets totaling $2.2 billion. It was taken over by Old National Bank, also in Indiana.

The nation's housing crisis has forced unprecedented numbers of homeowners out of their homes, made for a difficult homebuying environment, and tainted many Americans' ideal of owning a home. These factors are taking their toll on homeownership in this country. The Census Bureau says homeownership in the United States has fallen to its lowest level in more than 13 years, slipping to 65.9 percent in the second quarter. The increase in the homeownership rate seen during the housing boom has been more than completely wiped out by the bust.

What many consider to be a staple of American homeownership is expected to be on the chopping block as lawmakers look to trim the nation's deficit. The prized mortgage interest tax deduction has been part of the federal tax code since 1913. Currently, it costs the U.S. Treasury an estimated $94 billion a year. Congress has tossed around several proposals for amending this part of the federal tax code, including lowering the debt limit to $500,000 on first mortgages. Such a move is estimated to return between $5 billion and $15 billion.

The Federal Housing Administration's (FHA) Mortgagee Review Board has announced sanctions against 240 FHA-approved lenders. The federal agency says these lenders failed to meet its underwriting requirements for home loans, which are designed to minimize the risk of default. Actions taken against the 240 lenders include reprimands, probations, suspensions, and civil money penalties. In addition, some lenders will have their FHA-approval revoked.

The Chicago City Council has passed a local statute that will make lenders liable for the upkeep of vacant homes even when the borrower still holds the title. The ordinance was approved unanimously by council members. It amends the definition of a ""property owner"" in the municipal code to include an entity who holds a mortgage on the property, which means lenders are liable for routine maintenance and repairs even prior to foreclosing and taking control of the title if the borrower abandons the home.

Economic activity continues to grow but the pace has moderated in many parts of the country, weighed down by a persistent weakness in the residential real estate sector, according to the latest market-gauging Beige Book from the Federal Reserve. Contacts in the Boston district said housing markets ""remain in the doldrums."" A pickup in sales of higher-priced homes was evident in the D.C. area. In the Kansas City region, they're seeing an increase in all-cash purchases of existing homes, while demand in the Dallas district was described as ""choppy.""