U.S. Senator Ken Salazar

Member of the Agriculture, Energy and Veterans Affairs Committees

 

2300 15th Street, Suite 450 Denver, CO 80202 | 702 Hart Senate Building, Washington, D.C. 20510

 

 

For Immediate Release

Friday, December 14, 2007

CONTACT:Stephanie Valencia – 202-228-3630
Cody Wertz 303-350-0032

Sen. Salazar Supports Legislative Proposals to Modernize Federal Housing Administration and to Provide Tax Relief to Homeowners; Hopes Changes Will Begin to Address Battered Housing Market

WASHINGTON, DC – Today, United States Senator Ken Salazar voted to approve two measures that will help begin to address the nation's deepening housing crisis. The first is a measure to modernize the Federal Housing Administration (FHA), which was established to provide a reliable source of affordable mortgage loans for first-time homebuyers. The bill will enable the FHA to serve more subprime borrowers at affordable rates and terms, to attract borrowers that have turned to predatory loans in recent years, and to offer refinancing to homeowners struggling to meet their mortgage payments in the midst of the current turbulent mortgage markets.

“The housing crisis in America is becoming more dire by the day,” said Senator Salazar. “This is one small step the Senate can take to address the mortgage crisis facing our Nation today. We will continue to work in the Finance Committee and in the Senate to evaluate what additional legislative action that can be taken to ease the housing crunch.”

The Senate FHA modernization bill would take two important steps, both of which are designed to expand the FHA’s loan guarantee authority and provide an alternative to the risky subprime loans that helped contribute the nation’s current mortgage crisis.

  • First, it would help broaden the reach of FHA programs to regions with higher-cost housing by increasing FHA single-family loan limits across the board, at both the high and low ends. It sets the high-end limit at 100% of the median home price of an area (up from 95%), or the limit for loans eligible to be backed by Fannie Mae and Freddie Mac (also known as the government sponsored enterprise conforming loan limit, currently $417,000), whichever is lower; and increases the minimum loan limit to 65% of the GSE limit, which is sufficient to purchase a newly constructed home.

  • Second, it would reduce down payment requirements for covered loans. Specifically, it lowers and streamlines the down payment requirement to 1.5% from the current requirement of about 3%, depending on an assortment of factors, and sets the maximum loan amount in any individual case at 100% of the appraised value of the home.

In addition, the Senate Finance Committee, of which Senator Salazar is a member, held its first of several hearings yesterday on addressing the mortgage crisis. Building on input that was provided at that hearing, the Senate today passed a package of targeted tax relief for Americans affected by the housing decline. Senator Salazar cosponsored the proposal and supported it on final passage.

The centerpiece of the measure is a provision to temporarily eliminate the tax on mortgage debt forgiveness. Under current law, debt forgiveness is considered income for tax purposes, and is taxed at ordinary income rates. As a result, many homeowners have had their mortgage debts forgiven only to be stuck with a high tax bill. The Senate-passed proposal would create an exception from paying this tax on mortgage debt forgiveness. It would only apply to primary residences for 2007, 2008, and 2009, and has a cap of $2 million.

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