Housing legislation approved last week by the full Senate and House Ways and Means Committee.

By an overwhelming 84 to 12 margin, the Senate approved H.R. 3221, the Foreclosure Prevention Act of 2008. The measure would:
Modernize the Federal Housing Administration. The maximum FHA-insured loan would be increased to 110% of an area’s median home price, up to a maximum of $550,000, with a minimum downpayment of 3.5% up from 3% currently. When a temporary limit in the economic stimulus package of $729,750 for high-cost areas expires at the end of this year, the FHA limit is set to return to 95% of the regional median home price, up to $362,000.
Create a temporary home buyer tax credit. Home buyers would receive a $7,000 tax credit spread out over two years for purchasing homes in foreclosure or when foreclosure proceedings have begun.
Allow businesses to carry back net operating losses for four years. Any business that loses money in 2008 and 2009 would be able to use those losses to offset taxes they paid for the previous four years, compared with the two-year carryback allowed under current law. By allowing resulting losses to be claimed now, builders and other businesses that are suffering will be given additional financial resources to weather the economic storm, make their payrolls and even avoid bankruptcy.
Expand the mortgage revenue bond program. States would be provided new authority to issue $10 billion in bonds to be used to refinance subprime loans, mortgages for first-time home buyers and multifamily rental housing.

Also of note, lawmakers approved an NAHB-supported amendment offered by Sen. John Ensign (R-Nev.) to extend for one year a number of tax incentives, including a credit to enable home builders to offer the most energy-efficient residential construction technology.
House Housing Bill Advances
The House Ways and Means Committee, meanwhile, approved its version of the housing stimulus bill, H.R. 5720, the Housing Assistance Act of 2008.
The measure would create a first-time home buyer tax credit up to $7,500 for the purchase of any home for those who earn less than $70,000 annually ($140,000 for married couples), after which it phases out. Purchases eligible for the credit would be those made between April 9, 2008 and April 9, 2009. Home buyers would be required to repay the credit to the government, without interest, within 15 years.
The legislation would also make significant enhancements to the Low Income Housing Tax Credit (LIHTC) and tax-exempt housing bond programs, which would increase their effectiveness. Protecting LIHTC properties from volatile area median income calculations, allowing the tax credits to offset the Alternative Minimum Tax (AMT) and ensuring that interest on tax-exempt housing bonds is not subject to the AMT will greatly improve the development, delivery and sustainability of affordable housing, said Dunn.
Like the Senate bill, the House legislation would also provide for a temporary increase in state mortgage revenue bond authority and provide tax relief for home owners who do not itemize their deductions.
Also last week, House Financial Services Committee Chairman Barney Frank (D-Mass.) held a two-day hearing on his plan to allow the FHA to insure up to $300 billion worth of refinanced loans.

During the hearing, FHA Commissioner Brian Montgomery announced a new plan for his agency to provide added flexibility to insure more mortgages under expansion of the FHASecure program. Montgomery said the program would encourage lenders to erase some of a failing loan amount in order to receive a government guarantee of timely payments. The Administration said the expanded program will help 500,000 borrowers by the end of the year.
Frank’s plan would put more federal money into the program and is projected to help 1 million to 2 million home owners. It is anticipated that Frank’s foreclosure bill will be voted on in committee during the week of April 21.
Meanwhile, Senate Banking Committee Chairman Chris Dodd (D-Conn.) who has offered a similar proposal to Frank’s, convened a hearing on his plan that would create a new initiative within the FHA to refinance mortgages of distressed home owners.
While House floor action on the Ways and Means Committee bill is unclear, the tax portion could be combined with legislation that comes out of the House Financial Services Committee, perhaps by the end of the month.
The next step in the legislative process would be for the House to finalize and pass its housing legislation and then it would need to be reconciled with the Senate-passed measure.