Bank of America Corp, JPMorgan Chase & Co and US lenders may sign up customers backed by the government and shed bad home loans after the US Congress passed legislation to prop up Fannie Mae and Freddie Mac.
The bill lets the Federal Housing Administration guarantee (FHA) new loans for 400,000 homeowners after lenders reduce the unpaid balance and creates a new regulator for Fannie and Freddie, the government-sponsored companies that are the biggest providers of funding for US mortgages. US President George W. Bush will sign the legislation as early as this week, a spokesman said.
“We would expect to see an increase in the number of home buyers who are seeking FHA financing to purchase a home and that will be a benefit to us,” said Dan Frahm, a spokesman for Bank of America, which became the biggest mortgage lender after acquiring Countrywide Financial Corp this month.
The bank is the leading provider of FHA loans, he said.
The legislation, which passed the Senate 72-13 on Friday and the House of Representatives 272-152 on Wednesday, is Congress’ broadest response to plunging home prices, a more than doubling of foreclosures in the second quarter and market turmoil that led to the collapse of Bear Stearns Cos in March and the seizure of IndyMac Bancorp Inc on July 11.
Bankers and their lobbyists generally back the measure and say a tax credit for first-time buyers will create new borrowers, helping to trim an oversupply of available homes and slow the drop in home prices. The FHA program will let them cut the number of bad loans on their books and held by investors.
The legislation, unveiled in March, sped to approval after lawmakers added a plan proposed on July 13 by US Treasury Secretary Henry Paulson that lets him back up Fannie and Freddie. The Treasury could now buy shares of the companies, which own or back half of the US$12 billion in US mortgages. The change prompted Bush to drop a veto threat.
The bill creates a regulator for the two companies with the power to raise capital standards and restrict asset growth and executive pay. The measure gives the Federal Reserve a consultative role in overseeing their capital.
The centerpiece is a three-year FHA program that lets banks shift loans unlikely to be repaid to the government, after they agree to cut the mortgage principal. The Congressional Budget Office estimated in May that the program would cost US$1.7 billion and cover about 500,000 loans over five years.
“The enhanced role of the FHA should bring stability to many communities that have been particularly hard-hit by the subprime crisis,” said William Donovan, a partner at Venable LLP in Washington, who specializes in legislation affecting financial institutions.
The measure provides US$180 million for foreclosure-prevention counseling and US$4 billion to communities to buy and rehabilitate foreclosed homes. It raises Fannie Mae and Freddie Mac’s loan limit to US$625,500 from US$417,000 in high-cost areas.
JPMorgan Chase, which services about US$775 billion in mortgages, will probably tap the program since it will let investors shed deteriorating loans, spokesman Tom Kelly said.
“Before, you could cut the balance, but the investor is still holding this loan,” he said. “This moves the asset, locks in a price for the investor and allows them to move on.”
Also see: US housing slump losses may triple, executive says
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
CHINA REACTS: The patrol and reconnaissance plane ‘transited the Taiwan Strait in international airspace,’ the 7th Fleet said, while Taipei said it saw nothing unusual The US 7th Fleet yesterday said that a US Navy P-8A Poseidon flew through the Taiwan Strait, a day after US and Chinese defense heads held their first talks since November 2022 in an effort to reduce regional tensions. The patrol and reconnaissance plane “transited the Taiwan Strait in international airspace,” the 7th Fleet said in a news release. “By operating within the Taiwan Strait in accordance with international law, the United States upholds the navigational rights and freedoms of all nations.” In a separate statement, the Ministry of National Defense said that it monitored nearby waters and airspace as the aircraft
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique