The Helping Families Save Their Homes Act also contains a mixture of other housing and financial provisions, including a vain attempt to “fix” the failed FHA Hope for Homeowners program that Congress passed last summer. These include:  Liability waivers for mortgage servicers that modify home mortgages. Mortgage servicers receive payments from mortgages and forward them (after fees) to the owners of the mortgage loans.

As the main contact with homeowners, mortgage service companies should be able to refinance or modify mortgage loans in order to ensure that the owners get the best possible return, but many fear that unhappy banks that own the mortgage notes would sue them. The legislation provides these home loan servicing companies with a safe harbor so long as they act within certain specified boundaries.  Making $250,000 FDIC and NCUA deposit insurance levels permanent. Just last fall, Congress increased deposit insurance coverage by FDIC and NCUA to $250,000 until December 2009. This bill makes that change permanent and also increases the agencies’ borrowing authority to cover their losses.

In an effort to correct the Hope for Homeowners program, last summer, Congress created Hope for Homeowners, an FHA loan based program that it originally claimed would help up to 2 million homeowners. To date, according to the FHA, it has actually helped about 500 homeowners. The legislation makes a number of changes that will raise the cost of it by $2.3 billion but is unlikely to otherwise improve it. This would throw good money after bad.

Preventing predatory mortgage lenders from taking advantage of FHA home loan programs

Section 203 of H.R. 1106 makes it easier for FHA to stop predatory lenders from underwriting FHA-guaranteed home loans. This mortgage initiative is a needed reform.