BOSTON — Rep. Barney Frank, the chairman of the House Financial Services Committee, said Monday that he expects his package of mortgage reforms to be enacted in June.
"I think the chances are very good that somehow in June we're going to see this package passed," the Massachusetts Democrat told roughly 400 people at a Mortgage Bankers Association conference here.
He said he expects the House to pass a bill Wednesday to reform the government-sponsored enterprises and another that would modernize the Federal Housing Administration. The bills, which the House already approved last year, would be added to a foreclosure prevention bill his committee approved last week. A vote on the combined legislation is expected as early as Thursday.
"We are optimistic that these reforms will be accepted by the Senate," Rep. Frank said. "I am hoping by early June the president will" sign it.
The foreclosure prevention bill would have lenders write down mortgages so they can be refinanced with new, FHA-insured loans. David Kittle, the MBA's chairman-elect, said he did not expect "a big rush among lenders" to take such writedowns.
But Rep. Frank warned that if they do not voluntarily write down mortgages to help borrowers avoid foreclosure, tougher rules would be adopted next year.
"If inducements to lenders to voluntarily recognize a loss fails, we will see much tougher rules, and in some cases they may be too tough," he said. "The business methods we've seen are going to be under assault."
Last week the Congressional Budget Office estimated the FHA rescue legislation would cost about $2.7 billion over a five-year period. The agency estimated the bill would help roughly 500,000 borrowers. Rep. Frank's office had originally estimated it would help between 1 million and 2 million borrowers.
When asked whether he blamed the Federal Reserve Board's monetary policies after the 2001 recession for the crisis, Rep. Frank said loans were made to people who should not have received them.
Blaming the Fed "is like saying I'm an alcoholic because there is too much liquor in the stores," he said, to an outburst of laughter and applause.
Rep. Frank also said he was "disappointed" that, despite loan limits being temporarily raised for Fannie Mae and Freddie Mac, there have been problems getting lenders to make jumbo conforming loans.
He said he plans to hold a hearing in late May and will ask the Securities Industry and Financial Markets Association "why we don't have more bang for the buck."
"There is a chain of people blaming each other, and we're going to call everybody into the hearing," Rep. Frank said.
