Reverse Mortgage Legislation Update: March 11, 2010

The Senate Banking Committee announced that the new financial services bill would include a proposal for a new Office of Research and Analysis, also known as the National Institute of Finance. The goal of the agency is to provide early warnings of possible systemic collapses. To this end, the agency will give federal regulators daily updates on the stability of individual firms and their trading partners. It would standardize financial instruments and reporting mechanisms.

The idea for the Office of Research and Analysis, which would be situated under the Department of Treasury, with a director appointed by the President and confirmed by the Senate, came from Senator Jack Reed (D – RI). Sen. Reed said, “One of the problems we observed in the recent crisis is that nobody knew who had what.” This agency will hopefully help address that problem and reduce the uncertainty and doubt as a result. The budget of the agency would come from assessments on the largest financial firms. It would then gather data on the transactions of all US based financial institutions, regardless of whether the transaction is based in the US or abroad. While the agency would protect proprietary information, it would also be able to shed a light into the mortgage, sub-prime and hedge fund industries, all of which contributed to the financial crisis.

The bill, which is also expected to include a Consumer Financial Protection Agency (CFPA) under the Federal Reserve, appears to be almost negotiated and ready to be presented in the Senate.

The Obama Administration proposed a program to help encourage short sales by paying the servicing bank $1,000, providing $1,000 to help pay off the second lien, and giving $1,500 to the homeowner to encourage the sale of the home. The goal of the program is to encourage short sales, hoping to promote them over foreclosures.

Finally, Nebraska Governor Dave Heineman signed Legislative Bill 892 into law. The bill makes reverse mortgage guidelines applicable to Nebraska Mortgage Bankers licensed under the Residential Mortgage Licensing Act.

Written by Reva Minkoff

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