Commercial Real Estate Single-Asset Bankruptcies

Fannie Mae, Freddie Mac 30/30 Goals

Flood Insurance Reform

NEW: Freddie Mac Seasoned Mortgages Policy

High Yield Mortgage Disclosures

Respa Decision

Secondary Market for Commercial Real Estate Mortgages

Tiered Pricing


The Senate Judiciary Committee approved legislation Sept. 15 that would curb the practice of filling Chapter 1 1 bankruptcy petitions by debtors who are protecting only one asset. The MBA contends the rule hurts lenders because debtors can still collect rents from tenants while avoiding paying creditors under Chapter 11, although their "reorganization" is for a single asset.

Proposed affordable housing lending goals were given to Fannie and Freddie by the Department of Housing and Urban Development. These goals require both agencies to ensure that 300/o of their business goes to low- and moderate-income loans and central city lending programs. The congressionally mandated goals will be enforced by HUD and carry a $25,000-a-day penalty, which carries through until the goal is reached.

The Senate Banking Committee is considering a S. 1405 to direct the Office of Federal Housing Enterprise Oversight to create regulations requiring Fannie Mae and Freddie Mac to mandate flood insurance for loans they buy in special flood hazard areas.

Freddie Mac announced Sept. 7 that it will only accept seasoned mortgages, home mortgages closed within one year of delivery to Freddie, on a negotiated basis. The process may require lenders to provide Freddie with more detailed information about the borrowers credit history as well as updated property appraisals.

Legislation marked up by the Senate Banking Committee Sept. 21 imposes much greater disclosure requirements on high yield mortgages. The bill, Community Development, Credit Enhancement and Regulatory Improvement Act, S. 1275, is aimed at nonbank lenders who invest loans into high yield instruments.

The Department of Housing and Urban Development heard arguments on the four provisions of the Real Estate Settlement Procedures Act Aug. 6. The department said testimony and comments are being reviewed and a decision will be rendered on whether it plans to keep or modify them.

The House Subcommittee on Economic Growth and Credit Enhancement approved legislation, the Business, Commercial, and Community Development Secondary Market Development Act, H.R. 2600, which will allow for the creation of a secondary market for commercial real estate.

Proposed rule (Section 330, National Affordable Housing Act) prohibits a variation in mortgage charge rates that exceed 2% for FHA-insured mortgages made by a lender within designated areas. The intent is to stop discriminatory pricing that discourages home purchases or unfairly costs the borrower.

What's Next:

Bill likely to reach Senate floor this session.

Tougher 1995 goals may make GSEs broaden affordable housing plans.

Bill is scheduled for markup Sept. 28. I could reach the Senate floor this session.

Seasoned loans must be sold to Freddie by the Dec. 1 deadline; later offerings must be negotiated.

Bill heads to the Senate floor where it is likely to be passed.

HUD's final decision on provisions may take up to six months.

Trade groups press House for refinements; likely to reach House floor this session.

FHA may approve the proposed rule before end of 1993.

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