The summary below presents all the bill’s provisions, condensed into some general subject headings. Many of these provisions are likely to survive in whatever legislation comes next.
The credit markets are nearly frozen. Lenders can’t lend because they are receiving no payments on existing loans. The legislation allowed the government to buy troubled loans and mortgage securities. The funds that the institutions received when the government purchased the existing portfolios were to be available to issue new mortgages with more carefully specified and monitored lending standards.
• Create a Troubled Asset Relief Program (TARP) to purchase and guarantee the troubled assets from the financial institutions that hold mortgages and/or mortgage-backed securities.
•A new Office of Financial Stability within the Treasury to operate TARP, with input from the Federal Reserve, Federal Deposit Insurance Corp (FDIC – the agency that works with failed and failing financial institutions to insure and protect consumers), the Comptroller of the Currency (bank regulator), Office of Thrift Supervision (regulator of former savings and loan companies) and the Secretary of Housing and Urban Development.
• Timing for TARP purchases designed to assure that all the authorized $700 Billion is not released at one time.
•First release of funds to purchase troubled assets will be $250 Billion. Second release of up to
Second release of up to $100 Billion must be authorized by the President. Final $350 Billion can be issued only on Congressional approval. Congress given 15 days to act.
Many of these provisions are likely to survive in whatever legislation comes next.
Help Homeowners and Borrowers:
The legislation responded to the criticisms that lenders have been slow and/or unwilling to work with homeowners and borrowers. It encouraged negotiation in short sales and consumer efforts to refinance or reconfigure existing mortgages:
• When the Treasury (or other federal agency that holds mortgages) acquires troubled existing mortgages from financial institutions, agencies are required to work with lenders and mortgage servicers to find ways to avoid foreclosures.
• All federal agencies are required to work with servicers to facilitate loan modifications that will consider the net present value of the mortgage.
• Similar refinancing and foreclosure prevention requirements apply to mortgages involving owners of multi-family properties and owners of commercial properties. Policy goal is to assure that tenants don’t lose their residence or their place of business when an owner has problems with the mortgage.
• Changes to existing mortgages can include (but are not limited to) revisions in principal, interest rate and period for repayment.
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