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Senate Approves Safe Harbor, H4H Bill

The Senate passed the Helping Families Save Their Homes Act by a 91 to 5 vote on Wednesday, after shooting down the bill's ""bankruptcy cramdown amendment"":http://dsnews.comindex.php/home/news_story/2928 last week. The legislation provides mortgage servicers with a safe harbor from investor lawsuits, expands HUD's Hope for Homeowners (H4H) program, increases funding for foreclosure prevention efforts, establishes foreclosure protections for renters, and increases the FDIC's line of credit with the Treasury to $100 billion.
Lawmakers argue that the safe harbor provision is necessary to encourage servicers to ease loan terms for struggling homeowners. But such a shield has been a point of controversy because investors owning mortgage-backed securities claim it provides immunity to any financial institution that modifies loans, even when that institution has practiced predatory lending. Investors also argue that banks owning riskier second-lien mortgages could use the legislation to avoid billions of dollars of losses, while passing the cost on to investors who back these second mortgages.
According to Micah Green, speaking on behalf of a coalition of investors represented by the public affairs firm ""Weber Merritt"":http://webermerritt.com, ""Investors want to solve the foreclosure problem by working with servicers, homeowners, and the federal government to restructure loans in a way that provides both the ability and the incentive for homeowners to stay in their home and distribute the financial losses equitably.""
The act also addresses the previously under-used, convoluted ""H4H program"":http://portal.hud.gov/portal/pagex_pageid=73,7601299&_dad=portal&_schema=PORTAL, which has now been incorporated into the Obama administration’s Making Home Affordable plan to assist homeowners who are underwater. Provisions in the bill will lower fees for the program, streamline borrower certification requirements, and allow for incentive payments to servicers and originators to participate in the program.
The Senate's bill would also provide an additional $130 million to fund foreclosure prevention efforts including counseling, the hiring of additional fair housing field employees, and educating the public about foreclosure scams. And it would require banks that foreclose on a home occupied by a tenant to honor the existing leases or, for renters on month-to-month leases, provide a minimum of 90 days notice. If the bank sells the property to an owner-occupant, 90-days notice would be required.
According to ""Sen. Chris Dodd"":http://dodd.senate.gov/xq=node/4961 (D-Connecticut), one of the bill’s sponsors, the legislation will help banks increase lending and provide homeowners and lenders with the tools they need to combat the nation's foreclosure epidemic. ""While this bill is not a cure-all for our nation’s economic troubles, it makes important contributions towards the protection of American homeownership and a healthier banking system,"" Dodd said.
The growing number of ""bank failures"":http://www.fdic.gov/bank/individual/failed/banklist.html since the onset of the financial crisis has drained the FDIC's insurance fund. The Helping Families Save Their Homes Act increases the agency's Treasury credit line, which was previously $30 billion, to $100 billion. The act also permanently raises the insurance cap on individual bank accounts from $100,000 to $250,000.
The Senate also approved an amendment that would allow the U.S. Treasury to retain warrants in banks even after bailout funds have been repaid. The measure would enable the government to share in any stock gains as shares recover, but may incur backlash from financial institutions who want out from under the government's grip.
The House has already approved its own version of the legislation. Senators say they tailored the Helping Families Save Their Homes Act so that the two can be easily reconciled.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.

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