The United States Housing and Economic Recovery Act of 2008 () (commonly referred to as HERA) was designed primarily to address the
subprime mortgage crisis
The United States subprime mortgage crisis was a multinational financial crisis that occurred between 2007 and 2010 that contributed to the Financial crisis of 2007–2008, 2007–2008 global financial crisis. It was triggered by a large decline ...
. It authorized the
Federal Housing Administration
The Federal Housing Administration (FHA), also known as the Office of Housing within the Department of Housing and Urban Development (HUD), is a United States government agency founded by President Franklin Delano Roosevelt, created in part ...
to guarantee up to $300 billion in new 30-year
fixed rate mortgage
A fixed-rate mortgage (FRM) is a mortgage loan where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or "float". As a result, payment amounts and the duration of th ...
s for
subprime
In finance, subprime lending (also referred to as near-prime, subpar, non-prime, and second-chance lending) is the provision of loans to people in the United States who may have difficulty maintaining the repayment schedule. Historically, subpri ...
borrowers if lenders wrote down principal loan balances to 90 percent of current appraisal value. It was intended to restore confidence in
Fannie Mae
The Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, is a United States government-sponsored enterprise (GSE) and, since 1968, a publicly traded company. Founded in 1938 during the Great Depression as part of the N ...
and
Freddie Mac
The Federal Home Loan Mortgage Corporation (FHLMC), commonly known as Freddie Mac, is a publicly traded, government-sponsored enterprise (GSE), headquartered in Tysons Corner, Virginia.Fannie Mae
The Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, is a United States government-sponsored enterprise (GSE) and, since 1968, a publicly traded company. Founded in 1938 during the Great Depression as part of the N ...
and
Freddie Mac
The Federal Home Loan Mortgage Corporation (FHLMC), commonly known as Freddie Mac, is a publicly traded, government-sponsored enterprise (GSE), headquartered in Tysons Corner, Virginia.United States Congress
The United States Congress is the legislature of the federal government of the United States. It is bicameral, composed of a lower body, the House of Representatives, and an upper body, the Senate. It meets in the U.S. Capitol in Washing ...
on July 24, 2008 and signed by President
George W. Bush
George Walker Bush (born July 6, 1946) is an American politician who served as the 43rd president of the United States from 2001 to 2009. A member of the Republican Party, Bush family, and son of the 41st president George H. W. Bush, he ...
on July 30, 2008.
Subsequent amendments
Some provisions of the law were modified by the
American Recovery and Reinvestment Act of 2009
The American Recovery and Reinvestment Act of 2009 (ARRA) (), nicknamed the Recovery Act, was a stimulus package enacted by the 111th U.S. Congress and signed into law by President Barack Obama in February 2009. Developed in response to the Gr ...
, which was signed into law by
President Obama
Barack Hussein Obama II ( ; born August 4, 1961) is an American politician who served as the 44th president of the United States from 2009 to 2017. A member of the Democratic Party (United States), Democratic Party, Obama was the first Af ...
on February 17, 2009.
Federal Housing Finance Agency
The Act also established the
Federal Housing Finance Agency
The Federal Housing Finance Agency (FHFA) is an independent federal agency in the United States created as the successor regulatory agency of the Federal Housing Finance Board (FHFB), the Office of Federal Housing Enterprise Oversight (OFHEO), an ...
(FHFA) out of the
Federal Housing Finance Board
The Federal Housing Finance Board (FHFB) was an Independent agencies of the United States government, independent agency of the United States government established in 1989 in the aftermath of the savings and loan crisis to take over management of ...
(FHFB) and
Office of Federal Housing Enterprise Oversight
The Office of Federal Housing Enterprise Oversight (OFHEO) was an agency within the Department of Housing and Urban Development of the United States of America. It was charged with ensuring the capital adequacy and financial safety and soundness ...
(OFHEO).
Through the powers granted to FHFA, created by the Act, on September 7, 2008, FHFA director
James B. Lockhart III
James B. Lockhart III (born 1946) is an American U.S. Navy officer, business executive, and, since September 2009, Vice Chairman of WL Ross & Co. LLC, which manages $9 billion of private equity investments, a hedge fund and a Mortgage Recovery Fun ...
announced he had put
Fannie Mae
The Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, is a United States government-sponsored enterprise (GSE) and, since 1968, a publicly traded company. Founded in 1938 during the Great Depression as part of the N ...
and
Freddie Mac
The Federal Home Loan Mortgage Corporation (FHLMC), commonly known as Freddie Mac, is a publicly traded, government-sponsored enterprise (GSE), headquartered in Tysons Corner, Virginia.
Subtitles of the Act
Housing Assistance Tax Act of 2008
Included a first-time home buyer refundable tax credit for purchases on or after April 9, 2008 and before July 1, 2009 equal to 10 percent of the purchase price of a principal residence, up to $7,500.
*Phased out the credit for taxpayers with incomes over $75,000 ($150,000 for joint returns).
*Required taxpayers receiving the credit to repay it over 15 years in equal installments by imposing a surcharge on the taxpayers’ annual income tax.
The Act provided emergency assistance for the redevelopment of abandoned and foreclosed homes.
FHA Modernization Act of 2008
An
FHA loan
An FHA insured loan is a US Federal Housing Administration mortgage insurance backed mortgage loan that is provided by an FHA-approved lender. FHA mortgage insurance protects lenders against losses. They have historically allowed lower-income Am ...
is a mortgage loan whose repayment is guaranteed by the
Federal Housing Administration
The Federal Housing Administration (FHA), also known as the Office of Housing within the Department of Housing and Urban Development (HUD), is a United States government agency founded by President Franklin Delano Roosevelt, created in part ...
(FHA).
The Act:
*Increased the FHA loan limit from 95 percent to 110 percent of area median home price up to 150 percent of the GSE conforming loan limit, or $625,000), effective January 1, 2009.
*Required a down payment of at least 3.5 percent for any FHA loan.
Limited of regulation can Placed a 12-month moratorium second U.S. Dept. of Housing and Urban Development implementation of risk-based premiums.
*Prohibited seller-funded down payments.
Federal Housing Finance Regulatory Reform Act of 2008
This statute established the Federal Housing Finance Agency (FHFA) as an independent federal agency.
HOPE for Homeowners Act of 2008
*Authorized the FHA to insure up to $300 billion of 30-year fixed rate refinance loans up to 90% of appraised value for distressed borrowers.
Covered mortgage commitments made on or before January 1, 2008.
*Required existing mortgage holders to accept the proceeds of the insured loan as payment in full for all pre-existing indebtedness.
*Lender participation in this program was not required but voluntary to cover financial.
As of February 2009, only 451 applications had been received and 25 loans finalized, far short of the estimated 400,000 homeowners who were expected to participate. This was attributed to high fees, high interest rates, the need for a reduction in principal on the part of the lender, and the requirement that the federal government receive 50% of any appreciation in value of the house. Congress began hearings on the program in February.
Mortgage Disclosure Improvement Act of 2008
Secure and Fair Enforcement for Mortgage Licensing Act of 2008
"Secure and Fair Enforcement for Mortgage Licensing Act" (12 United States Code, Section 5100, ''et seq.''), passed by Congress and signed by President G.W. Bush in 2008, required all states to implement a Mortgage Loan Originator (hereafter: "MLO") licensing and registration system by August 1, 2009 (August 1, 2010 for legislatures that meet biennially). States can operate their own systems, subject to stringent federal standards, or they can participate in the Nationwide Mortgage Licensing System and Registry (hereafter: "the Registry"), a service operated jointly by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators (CSBS/AARMR). If the state's licensing and registration program does not meet minimum standards at any time, the U.S. Department of Housing and Urban Development (HUD) is empowered to step in and impose a compliant system upon the state.
The objectives of the SAFE Act include aggregating and improving the flow of information to and between regulators; providing increased accountability and tracking of MLOs; enhancing consumer protections; supporting anti-fraud measures; and providing consumers with easily accessible information at no charge regarding the employment history of and publicly adjudicated disciplinary and enforcement actions against MLOs.
Upon registration, MLOs are provided with a Unique Identifier number. All MLOs and their employers are required to provide this unique identifier to anyone who requests it, and the federally chartered mortgage institutions, Fannie Mae and Freddie Mac, require that it be placed on all loan documents for loans that they purchase. Consumers will be able to use this number to obtain basic information on any registered MLO. This information includes name and aliases, employment history, current employment and contact information, negative civil judgments or settlements, and disciplinary and criminal history.
The Act and the implementing regulations, which were issued jointly by the federal banking agencies in 2010 (12 Code of Federal Regulations III, section 365.101, ''et seq.''), define a "mortgage loan originator" as any individual who ''both'' takes residential loan applications ''and'' "offers or negotiates" residential mortgage loan terms. Additionally, the individual must undertake these activities for economic gain (''i.e.'', get paid for it). Persons who perform merely clerical or administrative tasks in connection with loan origination are not considered MLOs. The terms, "taking a mortgage loan application" and "offering or negotiating terms" are defined very broadly so that just about any person in the underwriting process who has more than cursory contact with a potential borrower is an MLO. Mortgage loans include financing and refinancing transactions, reverse mortgages, home equity lines of credit and just about any other credit transaction secured by a first or junior lien on a dwelling.
Not all persons who qualify as MLOs are required to become licensed or to register with the newly renamed Nationwide Mortgage and Licensing System and Registry ("the Registry"). Licensed Realtors and MLOs who work for federally regulated financial institutions, for example, are not required to be licensed as MLOs, although they are required to register. Those who would otherwise be required to register are exempted if they have (1) never been registered before and (2) perform five or fewer mortgage loan originations in any rolling twelve-month period. Registration must be renewed annually, and registrants must submit fingerprints for a criminal background check along with their first registration application.
See also
*
Homeowners Refinancing Act
The Homeowners Refinancing Act (also known as the Home Owners' Loan Act of 1933 and the Home Owners' Loan Corporation Act) was an Act of Congress of the United States passed as part of Franklin Delano Roosevelt's New Deal during the Great Depres ...
GPO GPO may refer to:
Government and politics
* General Post Office, Dublin
* General Post Office, in Britain
* Social Security Government Pension Offset, a provision reducing benefits
* Government Pharmaceutical Organization, a Thai state enterpris ...