The Senate on Tuesday moved closer to passing a housing bill after defeating two amendments that would weaken legal protections for residential servicers engaged in loan modifications and potentially handcuff the Federal Housing Administration's (FHA) single-family program.
The bill (S-896) includes improvements to the FHA Hope for Homeowners program to refinance underwater mortgages and increases Federal Deposit Insurance Corp.'s borrowing authority to deal with rising bank failures. The legislation also tries to increase loan modifications by creating a "safe harbor" that protects servicers from investor lawsuits.
Sen. Bob Corker, R-Tenn., said the provision goes too far and gives big banks a license to act in their self interest by modifying loans. His amendment would require servicers to "make sure homeowners and investors are both treated fairly," he said. Sen. Mel Martinez, R-Fla., warned that the Corker amendment would weaken the safe harbor and increase the number of foreclosures.
The Cocker amendment failed by a 39-63 vote. The Senate also voted down an amendment by Sen. David Vitter, R-La., that could trigger a cut back in FHA lending if the agency is headed toward insolvency. The Vitter amendment was defeated by a 36-56 vote.