Homes For Working Families

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Legislative Update

Homes for Working Families collects information about legislative activity that affects working families' access to affordable homes. We monitor and track the progress of local, state and federal policies. Please check back periodically for updates on current legislation.

Housing Assistance Tax Act of 2008
H.R. 5720

On April 9, the House Ways and Means Committee passed an $11 billion, 10-year plan with the goal of reviving the housing market slump with tax incentives and other relief for homebuyers and low-income housing developers. The bill includes a provision that gives first-time homebuyers a tax credit equal to 10 percent of the price of a home, up to $7,500. The credit would be available for one year and would have to be paid back over 15 years, without interest.

Also included in the bill is a provision to temporarily increase the amount of tax-exempt mortgage revenue bonds that states can issue to make loans to first-time buyers and for the construction of low-income rental housing by $10 billion. The full House still needs to vote on the bill.

The Senate passed companion legislation on April 10, which provides $13 billion in tax breaks to stimulate home sales and assist homebuilders, and also includes a $7,000 tax credit for individuals who purchase foreclosed properties. Additionally, the bill includes a provision of $4 billion in grants for communities to buy and rehabilitate abandoned homes.

The House and Senate versions of these two bills contain considerable differences that will need to be addressed in conference before the final bill is brought to the Congress for approval.

FHA Housing Stabilization and Homeownership Retention Act of 2008

On April 9 and 10, Representative Barney Frank (D-MA) held a hearing on the FHA Housing Stabilization and Homeownership Retention Act of 2008. Senator Dodd (D-CT) also held a hearing on April 10 to hear from witnesses on the HOPE for Homeowners Act of 2008. The hearings come in response to March announcements from both Representative Frank and Senator Dodd of their plans to introduce legislation to address the foreclosure crisis.

As currently drafted, Frank's bill would create a temporary FHA program to refinance troubled borrowers; allow the FHA to provide these refinances on a bulk basis, using auctions or other mechanisms; and authorize a $10 billion loan and grant program for states to enable them to set up programs to purchase foreclosed homes.

Senator Dodd has not yet filed his bill, but has released a bill summary. The legislation would create a new initiative within the FHA to refinance mortgages of distressed homeowners.

Temporary Increase of Caps on GSE Portfolios

Also on Capitol Hill, the recent temporary increase in GSE caps allows Fannie Mae and Freddie Mac to buy or guarantee mortgages 25 percent higher than an area's median home price - to a maximum of $729,750, up from the current limit of $417,000.

The increase allows the companies to fund bigger mortgages in areas with high home costs, such as the Washington area, where the median price is $450,000, according to the National Association of Realtors. Advocates have argued the increase could provide relief to housing markets.

Mortgage Forgiveness Debt Relief Act
S 1394

On December 20, 2007, President Bush signed the Mortgage Forgiveness Debt Relief Act, which will provide tax relief for homeowners who lose their homes to foreclosure. Homeowners will no longer be required to endure the challenge of paying income taxes owed on the unpaid mortgage debt of their already foreclosed home.

Qualifying debt will be limited to $2 million and includes debt incurred in the acquisition, construction, or improvement of the home. This extension applies to debts accrued on or after January 1, 2007 through 2010.

Mortgage Reform & Anti-Predatory Lending Act
H.R. 3915

On November 15, legislation was passed in the House that would make changes in the rules governing the residential mortgage market.

The bill would prohibit lenders and originators from receiving compensation based on the terms of a mortgage. It would protect consumers by establishing standards preventing them from getting trapped in a mortgage that is not in their best interest - a mortgage with provisions such as prepayment penalties, balloon payments or various fees paid by borrowers.

If enacted, the bill also would incorporate major stipulations of legislation introduced in 2006 (H.R. 1182), establishing standards for higher-cost mortgages. The Senate Banking Committee is expected to introduce companion legislation shortly.

Expanding American Homeownership Act
H.R. 1852

On Sept. 18 the U.S. House of Representatives passed H.R. 1852, the Expanding American Homeownership Act of 2007. The bill will revitalize the Federal Housing Administration (FHA), a federally insured home loan program that has been a reliable source for affordable fixed-rate mortgage loans, particularly for first-time homebuyers, for more than 60 years.

The bill will enable FHA to serve more subprime borrowers at affordable rates and terms and offer refinancing loan opportunities to borrowers struggling to meet their mortgage payments during this unstable time in the mortgage markets.

Specifically, the bill will 1) lower monthly down payments; 2) offer home-buyer counseling; 3) provide loans to higher risk borrowers without the unnecessary rate hikes; 4) enhance the FHA reverse mortgage program; 5) raise FHA multifamily loan limits; 6) apply the bill's excess profits toward affordable housing; and 6) increases single family loan limits.

Chairman of the House Financial Services Committee, Barney Frank (D-Mass), who originally introduced the bill with Rep. Maxine Waters (D-CA), said, "A revitalized FHA program will help future homeowners realize the dream of homeownership, and will prevent many first-time and inexperienced homebuyers from being pushed into loans that are unaffordable or difficult to understand."

The Senate Banking Committee introduced its version of FHA reform (S. 2338), Federal Housing Administration Modernization Act of 2007, on Nov. 13. Both the House and Senate bills, in conjunction with the proposed loan limit increase of the GSEs, will ease market strains and help make funds available to working families struggling to afford homes.

Senate leadership attempted to bring the bill to the floor by unanimous consent, but there was opposition and the bill has been shelved for now. Since the House already approved its version of the FHA bill, Senate passage would have resulted in legislation being enacted before year end.

Housing America's Workforce Act
S. 1078 and H.R. 1850

S. 1078 was introduced on April 10, 2007, by Sen. Hillary Clinton (D-N.Y.) and co-sponsored by Sens. Mel Martinez (R-Fla.), Edward Kennedy (D-Mass.), Richard Durbin (D-Ill.), Joseph Lieberman (Ind.-Conn.), Jack Reed (D-R.I.) and Gordon Smith (R-Ore.). The bill was referred to the Senate Committee on Finance.

H.R. 1850 was introduced on March 29, 2007 by Rep. Nydia Velazquez (D-N.Y.) and co-sponsored by Reps. Jim Ramstad (R-Minn.), Charles Gonzalez (D-Tex.), Joe Baca (D-Calif.), Gwen Moore (D-Wis.), Silvestre Reyes (D-Tex.), Loretta Sanchez (D-Calif.) and Edolphus Towns (D-N.Y.). The bill was referred to the House Committee on Ways and Means and the House Committee on Financial Services.

The bills, which are identical, include three primary components:

Employer Tax Credit

  • A federal tax credit to the employer equal to 50 percent of the housing benefit provided to eligible low- and moderate-income employees.
  • An eligible employee is an individual whose household income does not exceed 120 percent of the area median income.
  • In the case of homeownership assistance, the employer can take a tax credit on a housing benefit up to $10,000 or 6 percent of the employee's home purchase price (whichever is less) per employee. Homeownership assistance could be used to subsidize down payments, closing costs, financing costs, contributions to second mortgage pools, mortgage guarantee programs, or contributions to an employee homeownership savings account.
  • In the case of rental assistance, the employer can take a tax credit on a housing benefit up to $2,000 per employee. Rental assistance can be used toward security deposits and rental payments.
  • The bill allows non-taxable entities (such as universities and hospitals) to transfer (sell) their tax credit to others with a tax liability. Non-taxable entities include nonprofit organizations, states, political subdivisions within states, U.S. possessions, agencies, and Indian tribal governments and agencies.

Housing Benefit Exclusion

  • The bill treats housing assistance provided by the employer as a nontaxable benefit by excluding from the employee's taxable income up to $10,000 in homeownership assistance and up to $2,000 of rental assistance received. This ensures that the employee receives the full value of the housing benefit.

Employer-Assistance Housing Grants

  • The bill establishes a competitive, demonstration grant program for nonprofit, mission-driven housing organizations that provide technical assistance, program administration, and/or education and outreach support to employers undertaking employer-assisted housing initiatives.
  • The bill provides authorization for the appropriation of $5 million in competitive grant funds each year for three years with the U.S. Department of Housing and Urban Development (HUD) as the administrator.

National Affordable Housing Trust Fund Act
H.R. 2895

Despite the threat of presidential veto, The National Affordable Housing Trust Fund Act was passed in the House on October 10, 2007. The bill, was introduced on June 28, 2007, by House Financial Services Chairman Barney Frank (D-Mass.) and co-sponsored by Rep. Maxine Waters (D-Calif.) and Rep. Jim Ramstad (R-Minn.). The bill as amended will initially allocate between $800 million and $1 billion annually directly to states and local communities, without increasing government spending or the federal deficit.

The goal of the Trust Fund is to construct, rehabilitate and preserve 1,500,000 units of housing over the next 10 years. The bill seeks to accomplish this with funding from the proposed GSE Affordable Housing Fund ( H.R. 1427 ), FHA savings that result from the enactment of the Expanding American Homeownership Act ( H.R. 1852) and any other sources of funds subsequently identified.

The money generated could be used to build, rehabilitate and preserve affordable homes, with 75 percent of all funds going toward homes for those making less than 30 percent of the median income. The remaining 25 percent could be used for families making below 80 percent of the area median income.

The Fund would be administered by HUD, with 60 percent of the monies going to cities and counties, while the remaining 40 percent would be allocated to the states. Allocation would be based on a formula of factors including, population, housing affordability, cost of construction and rehabilitation, and the extent of the substandard and aging housing.

The bills were introduced in the Senate and have been sent to the Banking Committee for further action.

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