March 6, 2009 Dear MBA Member: On Thursday, March 5, the House passed H.R. 1106, the "Helping Families Save Their Homes Act" by a vote of 234 to 191.  The final vote came a full week after the Speaker of the House suspended debate on the bill and instructed its sponsors to make further changes that would protect lenders and homeowners from the negative consequences of bankruptcy. While MBA continues to oppose any form of bankruptcy cram down, we were able to secure key changes that will narrow the reach of this legislation and hopefully limit the disruption it will cause in the marketplace.  The bill, as passed by the House, will apply only to existing mortgages.  It also includes a provision allowing lenders to share in any appreciation in property value if the home is resold during the first five years after a judicial modification.  To address concerns that cram down would have a devastating effect on loans backed by the FHA, VA, and RHS, the bill allows these agencies to pay all or part of any claims on loans that are modified.  Additionally, to address the concerns of both industry and the Obama administration that cram down should only be available as a last resort, the legislation was amended to require borrowers to contact their servicer and request a loan modification at least 30 days prior to filing for bankruptcy. In making this request, borrowers will be required to provide information pertaining to their income, expenses, and debts.  The bill also requires the borrower to consider a qualified loan modification that meets the parameters laid out in President Obama's new foreclosure prevention plan.  Finally, the bill now requires judges to use established FHA appraisal guidelines in determining the fair market value of the property and to deny judicial modifications to homeowners who can afford to make their payments and are simply "under water." While opposing the inclusion of bankruptcy cram down in H.R. 1106, MBA did advocate for other provisions, including changes to HUD's HOPE for Homeowners program, which was originally intended to help as many as 400,000 borrowers refinance into more affordable FHA-backed loans, but has thus far experienced extremely low volume.   To make the program more attractive to servicers, the bill permits payments of up to $1,000 to servicers for each successful refinance.  To make the program more attractive to borrowers, MBA worked with the House Financial Services Committee to craft changes that would reduce the mandatory upfront and annual insurance premiums to a more affordable level.  The bill also eliminates the March 1, 2008 affordability test, which many borrowers found difficult to meet, and imposes a more equitable appreciation sharing arrangement among the lender, borrower, and government. H.R. 1106 also provides a limited safe harbor for servicers that would protect them against certain legal liabilities.  Under current law, lenders that have packaged and sold mortgages to investors as securities may be held liable for losses suffered by the investor as a result of a loan modification. The bill would prevent investors from suing lenders for losses that occur if default on the mortgage has occurred or is "reasonably foreseeable", the borrower occupies the home, and the lender "reasonably and in good faith" believes that more money would be recovered through a loan modification or workout plan than foreclosure. Finally, H.R. 1106 permanently increases the Federal Deposit Insurance Corporation's (FDIC) coverage for bank and credit union deposits from $100,000 to $250,000, thus helping to provide depository institutions with funds to increase lending. Now that the House has passed this legislation, attention will turn to the Senate, where we are working to achieve even more progress.  MBA, working in concert with its member companies and other financial trades, will continue to consult with a bipartisan group of Senators who share our concerns about the negative consequences - for homeowners and the housing market - of allowing bankruptcy judges to rewrite the contractual terms of mortgages.  MBA will continue to oppose bankruptcy cram down while advocating for further changes to limit its scope. Attached to this email, please find a press statement from MBA Chairman David G. Kittle, CMB. As always, please feel free to contact me if you have any questions. Yours Very Truly, John A. Courson President and Chief Executive Officer Mortgage Bankers Association If you have difficulties reading this HTML email, please go to http://events.mortgagebankers.org/email/68046.html.

This advertisement is brought to you by the Mortgage Bankers Association (MBA). Copyright © 2009 Mortgage Bankers Association. All rights reserved. Terms of Use | Privacy Statement To unsubscribe to future mailings, click here. Mortgage Bankers Association 1331 L Street, NW Washington, DC 20005 (800) 348-8653