August 4, 2008 - Realty Times Feature Article by Kenneth R. HarneyThe ink from President Bush's signature on the 2008 housing bill was barely dry when the first critical backlashes began circulating in Washington.
Most ominous of all: Doubts about whether HUD will be able to complete the operating rules and regulations for the centerpiece of the entire legislation - the $300 billion foreclosure-relief program - by the October 1 starting date mandated by Congress.
Unnamed HUD sources had been quoted earlier in the week saying that it would be almost impossible for the agency to have the complicated and extensive underwriting criteria required to run the program in final form that quickly.
That, in turn, would delay Congress's efforts to reach out and save up to 400,000 deeply distressed home owners by refinancing them into affordable, fixed-rate FHA loans.
The Democratic chairmen of the Senate and House committees that authored the "HOPE" refinancing program were incensed that HUD couldn't produce the operating rules in a more timely manner.
"The notion that this takes a normal bureaucratic response when you have this social and economic crisis is unacceptable," Rep. Barney Frank, chairman of the House Financial Services Committee told the American Banker, a trade publication. "I cannot believe that this would wait."
HUD Secretary Steve Preston quickly reassured both Frank and Sen. Chris Dodd, chairman of the Senate banking committee, that his department would pull out all stops to have the FHA rules ready by October 1 - breakneck speed by usual federal rule-making standards. Senator Dodd met with Preston and later said that HUD staffers "are all very confident" that they'll be able to meet the deadline.
Meanwhile, major mortgage lenders are complaining that the final housing legislation is forcing them to retool their computer system for the second time within a short time - at great expense - in order to participate with FHA refinancing or new home purchase programs.
That's because Congress clamped a one year moratorium on the use of "risk based pricing" underwriting for all FHA loans, barely weeks after FHA itself required lenders to switch their systems to a risk-based program using credit scores and varying downpayment amounts.
Anne Canfield, executive director of the Consumer Mortgage Coalition, which represents the biggest players in the FHA arena such as Bank of America, Wells Fargo and Citigroup, said that having to retool vast electronic systems within such a compressed time period could temporarily put some lenders out of the FHA business after October 1, thereby defeating Congress's objective of rapidly shifting more borrowers out of suprime and into more affordable home loans.
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