WASHINGTON — Senate Banking Committee Chairman Chris Dodd called Saturday for the heads of the agencies tasked with writing regulations that would implement a foreclosure prevention program to explain why it might not be operational when it goes into effect in October.
The Connecticut Democrat's remarks came at a press conference with Senate Majority Leader Harry Reid to herald the Senate's passage of the housing bill by a vote of 72 to 13 earlier that day. President Bush is expected to sign the measure soon.
"I want ... the oversight board that is responsible for this ... in my office on Tuesday to tell me why we can't begin immediately to get this bill working and to get the rules in place so we can begin making a difference," said Sen. Dodd.
At issue is a foreclosure prevention program included in the bill which would let borrowers with mortgages that cost more than the value of their homes refinance into cheaper loans insured by the Federal Housing Administration, a division of Housing and Urban Development Department.
Sen. Dodd's remarks came in response to a story first reported by American Banker Friday in which a HUD spokesperson said the agencies were "absolutely totally unlikely" to have the program ready by October.
The agencies writing the regulations are HUD, the Treasury Department, the Federal Reserve Board and the Federal Deposit Insurance Corp. In the interview the spokesperson, who declined to be identified by name, said the agencies were "going to develop regulations as fast as humanly possible," but probably wouldn't have a proposed regulation ready until "early next year."
"It's a new program, it's a program with a large scope, and there's going to be a lot of input from the industry," said the spokesperson. "And because of the board structure, there is going to have to be a lot of clearance procedures."
The proposal would likely follow the usual notice and comment period which generally allows 60 days to collect feedback before incorporating any changes and issuing a final rule, the spokesperson said.
Sen. Dodd said Saturday that he was "terribly disappointed," by HUD and expected the refinancing option to be ready by October.
"We wrote this legislation specifically to bypass the normal rulemaking process. We began this process really... as early as January and we introduced a bill last spring. The idea that HUD is just sort of getting together to think about possibly a year before we can offer any relief for homeowners is totally unacceptable," he said. "I'm not going to tolerate a slow walk on something that is so important to the American consumers when they may or may not be able to keep their homes."
The comments from HUD surprised some in the banking industry who have said that the agencies have already begun preliminary work on crafting the refinancing program.
House Financial Services Committee Chairman Barney Frank said in an interview Friday that he would force the agencies to speed up rule-writing after convening a hearing in which he asked servicers to hold off on foreclosures for borrowers who otherwise could refinance into the FHA program.
"The notion that this takes a normal bureaucratic response when you have this social and economic crisis is unacceptable. … That would be incompetence bordering on malfeasance," the Massachusetts Democrat said in an interview Friday. "I cannot believe that this would wait."
"We are going to persuade them to change," he said. "They don't have to wait to October to talk to each other."
On Saturday, Sen. Dodd said he supported Rep. Frank's call to lenders to delay foreclosures until the new FHA refinancing program is up and running.