While the House has passed several major housing relief measures, the Senate hasn't managed to pass even one. On the eve of Thanksgiving recess, the House approved the most sweeping reforms of the national mortgage system in more than two decades.
Meanwhile, the Senate stalled legislation that would strengthen the Federal Housing Administration's mortgage programs, a key resource for consumers who need to refinance out of adjustable-rate loans with rapidly escalating monthly payments into affordable fixed-rate mortgages.
The FHA reform bill passed the House in September and had been approved by the Senate Banking Committee. But it was blocked from floor action by a small group of Republicans not sympathetic to federal involvement.
The FHA bill is important for high-cost housing markets nationwide because it raises the maximum mortgage amounts the agency can insure. It also would cut minimum down payments, and allow FHA to charge lower premiums to applicants with better credit histories and higher premiums to borrowers with less favorable credit backgrounds.
The bill was blocked Nov. 15 by Sens. Tom Coburn, R-Okla., and Jim DeMint, R-S.C., following a hold placed on it by Elizabeth Dole, R-N.C.
Dole objects to FHA's plan to begin pricing mortgages based on credit risk starting in January, whether the reform bill is approved or not.
Dole is an ally of the private mortgage insurance industry, which would have to compete with a revived FHA in the low-down-payment segment of the mortgage market.
Coburn and DeMint argued the FHA reform proposal was too far-reaching to be rushed through the Senate before the Thanksgiving break.
The House-passed mortgage reform bill may face a similar uncertain fate in the Senate. Among other provisions, it would:
--Require every loan originator in the country to be registered and licensed in a national database and meet minimum educational and certification standards.
--Require all originators to make only loans whose terms are "appropriate" to the borrower. The borrower must have a "reasonable" ability to repay the mortgage and must receive a "net tangible benefit" from the loan in the case of a refinancing.
--Ban and punish "steering" of borrowers into higher cost mortgages than their credit histories actually merit. This is a problem that has been prevalent in home loans made to first-time and minority applicants, who often have minimal or "thin" national credit bureau files, but solid payment histories on rents, utility bills and other forms of credit that are not reported to the bureaus. Some loan officers also steer minority applicants into inappropriately higher-cost mortgages solely to reap higher fees, according to consumer advocates.
--Extend legal liability for toxic and predatory loans to Wall Street firms that securitize pools of mortgages into bonds. Under current rules, those companies often are insulated from suits over predatory loans, even though they may have been aware, or should have suspected, that borrowers had been abused.
--Clean up the appraisal field by prohibiting and punishing interference in valuations, especially brokers and lenders pressuring appraisers to "hit the number" needed to allow loans to close.
Banking and mortgage lobbyists sought unsuccessfully to remove or soften some of the bill's reforms before the House vote, but are in a position to block the legislation outright in the Senate.
Banking Committee Chairman Chris Dodd, D-Conn., had promised his own mortgage reform bill, but has introduced nothing.
Most members of the House and Senate would likely agree the American mortgage system broke down between 2001 and 2005, allowing lax underwriting, bogus appraisals and fraud to trigger billions of dollars of losses and thousands of foreclosures. But when the questions turn to how to fix the system, the answers appear to rest with the Senate, where the message so far has been: Hey, what's the rush?
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