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Housing + Wall Street Reform: A Match Made in Heaven? (Updates and Poll)

As you know, Congress approved a version of Wall Street Reform out of conference committee last week. The prospects for quick passage of the bill are dimmer now that Senator Byrd has passed away, with the Senate reopening debate to secure enough support. Nonetheless, we are still just a few votes away from some of the most significant consumer protections in 80 years. And housing is right in the thick of it.

The bill is designed to restore accountability, transparency, and security to the financial system – and in theory, make homeownership a safer investment for buyers and lenders alike. But some lending institutions are warning that these reforms could end up costing consumers more.

Tell us what you think: Will financial reform be good for the housing market?

Below are some of the provisions currently in the bill that could have the greatest effect on affordable housing and the broader housing market. Read them over, and then let us know whether you think they’re a good idea.

  • Mortgage Reform: The bill would force lenders to guarantee that a borrower will be able to repay before giving out a mortgage loan. It would also penalize irresponsible lending, require additional disclosures, and create a Federal Office of Housing Counseling.  The legislation also requires lenders to retain 5 percent of the risk related to mortgage loans, effectively giving them “skin in the game.” The idea here is to keep lenders invested in the long term security of loans. The question (for you) is whether it would make it harder for consumers to get the loans they need.
  • NSP 3: As we mentioned late last week, the first conference bill currently includes $1 billion to help states and communities respond to the foreclosure crisis through the Neighborhood Stabilization Program (NSP). This would be the third round of funds for grantees’ efforts in buying up foreclosed or unused properties and getting them ready to rent or sell again at an affordable rate.
  • Foreclosure Legal Assistance: The package would create a program to provide legal assistance related to foreclosure prevention and tenant rights for low-and moderate-income homeowners and renters.
  • Emergency Mortgage Relief: Congress would approve $1 billion to provide low-interest loans to qualified unemployed homeowners, if they have reasonable prospects for reemployment, to help pay their mortgage and avoid foreclosure.
  • Fannie Mae/Freddie Mac: The bill would require the Department of Treasury to conduct a study on ending the conservatorship of Fannie Mae and Freddie Mac, and reforming the Housing Finance System.

So there you have it – a snapshot of how reform could affect the housing market. Now, we need to hear from you on how it adds up. Is this a good idea? Please share your thoughts, and feel free to add comments below – we’ll be sure to share them with readers later this week.

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