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The president signed the building permit; important legislative approvals will have to be made in the next few month.

President Bush today dawned on the Housekeeping and Economic Recovery Act of 2008, Pub. L. No. 110-287.1, which provides a number of home loan supportive measures, among them a mortgage refinancing programme under the Federal Housing Administration (FHA) and further home loan subsidies and regulations for government-sponsored businesses (GSEs).

Housing law was adopted by the House on 23 July and by the Senate as H.R. 3221 on 26 July. Overall, the Housing Act came into force immediately, although its transposition will necessitate considerable administration measures in the coming few months. However, the new legislation will not be implemented in the next few years. Housing law is the same as the draft law described in our July 23, 2008 consultation,2 but some remarks on the operational impact of the FTA funding programme and on the other key functions faced by Treasury, HUD, the Fed and other government ministries and agents are appropriate.

At the heart of the Housing Act is the HOPE for Homeowners programme. The programme will allow non-performing borrower, who have demonstrated readiness and ability to pay back, to fund themselves from onerous mortgages that are or may be in arrears in the near future and into a 30-year fixed-rate mortgage secured by the FHA.

This programme will enter into force on 1 October 2008 and will run for three years. The FHA is empowered to provide up to 300 billion dollars in such loan facilities, and the facilities are funded through Treasury HOPE bonds. For the programme to enter into force as planned, Treasury, HUD and FHA will have substantial work ahead of them over the next two month, involving the restructuring of the loan programme and the establishment of rules governing it.

However, the programme is not compulsory and raises important issues as to whether the programme will deliver the benefit to the borrowers that Congress is expecting. Owners of an outstanding credit - usually a service provider - must undertake to free mortgages so that they can refinance. In view of the type and size of outstanding credit, a service provider that is almost always involved will cause the investor to incur a financial loss. However, the risk of a default is limited.

This means that the revenue the service provider receives from re-financing is less than the amount due on the initial credit. At present, the obligations of credit intermediaries vis-Ă -vis the owner or investor of the credit are regulated both by the agreement and by the doctrine of trust obligation in state comma.

Whilst contract and state commons laws may differ, a service provider must generally maximise value and prevent loss. In the case of defaulting or impaired credit, the service provider and the investor may structure the contract so as to favour enforcement over credit re-financing or alteration. Therefore, the involvement of a service provider in the programme may give rise to doubts as to liabilities.

In order to meet these objections, Section 1403 of the Housing Act establishes a restricted 'safe harbour'. "A service provider is considered to be trading in the best interest of the investor under the safe-harbor if it is participating in a modifi cation or HOPE funding of a credit where (i) a failure has been incurred or is reasonably foreseen; (ii) the debtor is assuming the title to the mortgage; and (iii) the expected repayment of the main liability arising from the modifi cation or funding on a net present value basis will exceed the expected repayment by enforcement.

It is potentially useful to have this port of safety, although a service provider has to carry out a comprehensive, bar-value comparison as well. "Other than as set forth in any agreement between a provider of bundled home mortgage loans and an investor...." However, this exemption may constitute a significant obstacle to the service provider's access to the programme.

In general, IFs do not allow service providers to change the conditions of a mortgage if the change would lead to a capital outflow. In addition, to the greater the value in enforcement, a service provider will be obliged to look for this workaround. The full transposition of the Housing Act will involve several law enforcement bodies and independents taking essential and complex choices, some of which may be potentially comprehensive.

In the short term, therefore, bankers, savings institutions and other mortgage sector players will have the opportunity to consider many of the measures that concern them. Funding for Fannie Mae and Freddie Mac. While Treasury is not obliged to adopt regulations to assist Fannie and Freddie, whether through capital investment or by means of indebtedness, it must now take a consistent set of carefully monitored choices about when and how to intervene.

Both Fannie and Freddie must agree to the purchase of Treasury in an effective manner, and they will have a particularly complex array of choices about possible capital asset dilution. 1. Foundation of the Federal Institute for Housing Economics. FHFA will supersede both the existing Fannie Mae and Freddie Mac Regulatory Authority, the Office of Housing Enterprise Obsight and the Federal Housing Finance Board (FHFB), which supervises the Federal Home Loan Banks (FHLBs).

It is now up to the present government to establish FMFA, which includes the nomination (with Senate confirmation) of a Executive Vice President. Meanwhile, the present OFHEO Executive Vice President, James Lockhart, will lead OFHA. There is also a Supervisory Committee composed of the Executive Secretary of the Financial Action Task Force (FHFA), the Ministers of Finance and HUD Secretary and the SEC Chair.

HUD will take over the roles of both agents as well as certain housing related roles now performed by HUD and will recruit suitable HUD, OFHEO and FHFB people. It is the duty of the Financial Action Task Force (FHFA) to complete the equity requirements for the HSE within 180 working days, i. e. by 27 January 2009.

Prior to adopting these or most other essential regulations, the Federal Reserve must be consulted by the Financial Action Task Force (FHFA). Objectives of living. For Fannie and Freddie, it must define single-family and multi-family house targets to be met in the context of the loan purchases made by both companies for 2010 and beyond. Fannie as well as Freddie are currently defeated by the 2008 targets already established by HUD and HUD has the choice to maintain the 2008 targets in 2009 or to establish new targets (subject to a submission of comments by the public).

Also, if Fannie or Freddie do not reach their residential objectives, there is a certain executive agency in place at that time. FMHFA may also establish residential objectives for the FMFLs. There are no time limits laid down, but the FMFA has the power to ask Fannie and Freddie for information to establish whether there are differences between similar minorities and non minorities in interest rate levels for similar mortgages.

Should it provisionally find that such differences apply to a loan from a particular creditor, it must make that determination to the lender's competent supervisory authority. Each year the Financial Action Task Force (FHFA) must submit a progress paper to Congress on its investigations of the interest differential. Under the Housing Act, Fannie and Freddie are exempted from certain registrations previously made under the Securities Exchange Act of 1934.

Fannie recorded its ordinary and preference shareholders on July 18 and its various preference shareholders on Monday, respectively. - Fund for housing construction and community development. The HUD must set up a Housing Trust Fund and an associated programme that provides state and local government subsidies to help both low-income family and individual housing programmes.

The Ministry of Finance, as part of its municipal redevelopment activity, must set up a magnetic capital endowment scheme to encourage investments in accessible accommodation and related services. Fannie and Freddie are legally obliged to contribute to both foundations. FHFA has some margin of appreciation to defer fees during periods of distress.

For the first three years, some of Fannie's and Freddie's dues may be used to refund funds from the FHA's Homeowners Programs. Mortgages licencing. The Housing Act, in an effort to establish certain basic standards for state-licensed lenders and keep most regulations at the state tier, encouraged the Conference of State Banking Supervisors and the American Association of Residential Mortgage Regulators establish a national mortgage license system and register.

Mortgagors continue to be obliged to respect state license legislation. Meanwhile, the Swiss Financial Supervisory Authority must make sure that the staff of its supervised institution meets similar standards and is enrolled in the national system. Under the Housing Act, the FHA's authority in areas beyond the funding of non-performing mortgages is amended - and largely extended -.

Conditions for FHA-insured lending will be amended in several ways, among which raising the maximum nominal amount of an eligible lending, advance payment, premium and qualifying property and commercial building lending. Undo a mortgage. However, the Housekeeping Act also changes the power of the FHA to insulate homeowners' conversion mortgages, which is a reverse mortgage.

Creditors of that credit instrument must be able to demonstrate that creditors have obtained adequate advice on the risk associated with the instrument and are forbidden to ask a creditor to use the credit income to buy investments or other instruments from the creditor. Such changes will necessitate substantial changes to the FHA's reverse mortgage policy.

Ministry of Veteran Affairs must make changes to VA-secured mortgage mortgages for members of the services and vets, while Ministry of Defense must establish a Home Property and Forced Penalty Policy Advisory Programme for senior members of the armed forces.

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