July 30, 2008 - Housing and Economic Recovery Act

Policy Name: Housing and Economic Recovery Act of 2008, (H.R. 3221)

Date: Effective July 30, 2008

Congress enacted The Housing and Economic Recovery Act of 2008 (HERA) as one set of measures to address the subprime mortgage crisis in 2008. HERA had the objective of restoring public confidence in Fannie Mae and Freddie Mac by strengthening regulations and supplying large amounts of credit to the mortgage market. The statute created a new regulator, the Federal Housing Finance Agency (FHFA), which put Fannie Mae and Freddie Mac under conservatorship the same year. HERA was composed of subtitle acts, including the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) and the Federal Housing Administration (FHA) Modernization Act of 2008.

The SAFE Act required all states to institute a mortgage loan originator licensing and registration system by August 2009. States were able to operate their own systems compliant with strict federal standards, or states could participate in the National Mortgage Licensing System and Registry. The SAFE Act intended to set a baseline of oversight and promote uniformity among licensing standards nationwide, as over the previous twenty years, licensing standards differed from state to state.

The FHA Modernization Act of 2008 increased the FHA loan limit from 95% to 110% of area median home price. The act also required a 3.5% down payment on any FHA loan, while prohibiting seller-funded down payments. Lastly, HERA permitted the FHA to guarantee up to $300 billion of 30-year fixed-rate refinance loans up to 90% of appraised value for distressed borrowers.