The Housing and Economic Rehabilitation Act was passed in 2008 to prevent foreclosures and provide assistance to homeowners. The act allowed the Federal Housing Administration to insure refinancing of defaulting mortgages, but only for owner-occupied primary residences. The act also created the Federal Housing Finance Agency and an affordable permanent housing fund to be funded by Fannie Mae and Freddie Mac.
The Housing and Economic Rehabilitation Act is a body of legislation designed to help homeowners at risk of losing their homes and to help people who could not afford to own homes. It was also designed to instill greater oversight into the mortgage financing system. Several measures have been put in place to help the government achieve these goals.
This piece of legislation was passed by President George W. Bush on July 30, 2008. It was a time when there was strong discontent among homeowners. Due to a financial crisis, a large number of Americans have experienced foreclosure. The Housing and Economic Rehabilitation Act aimed to prevent foreclosure on a larger scale.
For homeowners, a significant element of the act was a provision that allowed the Federal Housing Administration (FHA) to make billions of United States dollars available to insure refinancing of defaulting mortgages. This program was completely voluntary, neither homeowners nor lenders could be forced to participate. Those who participated had to meet certain requirements.
This Housing and Economic Rehabilitation Act did not allow his assistance to be used by investors or for second home mortgages. The program was limited to owner-occupied primary residences only. Income restrictions applied to homeowners who have used the program.
Under the regulations of the act, a homeowner had to have a mortgage that was at least 32% of his or her total income to be eligible. Individuals with fraud convictions were found to be ineligible. In addition, receiving assistance requires a person to certify that they did not intentionally default on their mortgage and did not obtain the loan through fraudulent means.
Mortgage owners were required to suffer a loss of at least 10 percent before the government could help. These lenders had to voluntarily reduce mortgages to at least 90% of the property’s value. This was not, however, a fixed discounted amount. In some cases, the lender could suffer substantially greater losses.
In addition to the mortgage discount, lenders were required to waive fees and penalties. They were also required to assist with setup and closing costs for new loans. This program has been designed as an investment strategy. Instead of the government granting funds, the Housing and Economic Rehabilitation Act authorized the government to make future profits on the homes they helped save.
While this temporary program was designed to run from 1 October 2008 to 30 September 2011, there are several permanent elements. The signing of this act into law created the Federal Housing Finance Agency (FHFA). The purpose of this agency is to act as a “regulator with all the necessary authorities to oversee the vital components of our country’s secondary mortgage markets.” The FHFA was made up of unions of several federal entities.
Among these entities is the Office of Federal Housing Enterprise Oversight, whose focus was the operations of Fannie Mae and Freddie Mac. The Federal Housing Finance Board was responsible for regulating a group of financial institutions known as FHL banks. The GSE mission office in the Department of Housing and Urban Development was included as a benefit to community development and to improve home ownership figures while reducing discrimination.
There was another permanent change involving Fannie Mae and Fannie Mac. The Housing and Economic Rehabilitation Act included the creation of an affordable permanent housing fund to be funded by these two entities. This trust was designed to generate and maintain low and ultra-low income housing.
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