The housing rescue bill signed into law last week presents Bank of America with opportunities to expand its efforts to keep struggling borrowers in their homes and to increase the bank's production of various mortgage products.

Key features of the Housing and Economic Recovery Act of 2008 include a new Federal Housing Administration (FHA) program to help distressed homeowners obtain more affordable loans, enhancements to traditional FHA loan programs and other provisions to address America's troubled housing market.

How does the law affect Bank of America customers? It provides lenders with another tool to help at-risk homeowners, offering those who qualify a way to refinance into low-cost, fixed-rate mortgages backed by the FHA. The resulting increase in FHA loan production should create new growth opportunities for Bank of America, already the nation's leading provider of FHA financing.

Even before the housing bill was passed, Bank of America had announced plans to modify or work out at least $40 billion in troubled mortgage loans over the next two years. The goal is to help an estimated 265,000 borrowers stay in their homes instead of lose them to foreclosure.

Overall, the new legislation is aimed at strengthening nationwide efforts to help struggling homeowners and restore confidence in America's home financing system.

The law will modernize the FHA by increasing its maximum mortgage amount to $625,500 in high-cost areas, up from $417,000, thus offering more refinancing and purchase loan opportunities. Other features of the law include enhanced oversight and new regulatory guidelines for the government-sponsored enterprises (GSEs), including Fannie Mae and Freddie Mac.

Bank of America was a longtime supporter of FHA modernization and efforts to create a new regulatory regime for the GSEs. Bank of America also worked closely with legislators to ensure that the new FHA refinance program was voluntary, targeted and commercially viable.

To qualify for a loan under this program, at-risk borrowers must meet at least three key criteria; they must:

Currently be living in their home


Have obtained their mortgage between January 2005 and June 2007


Be spending at least 31% of their gross monthly income on mortgage debt on their primary residence

 

Such loans will be pegged to the market value of a borrower's home at the time the loan is refinanced.

The new legislation also includes a tax credit for first-time buyers and a new standard deduction up to $1,000 for joint filers ($500 for individuals) who are unable to itemize deductions.

In addition, the law will create opportunities for Bank of America to expand its leadership position in reverse mortgage production. As the Department of Housing and Urban Development refines guidelines that will raise the loan limits on FHA-insured Home Equity Conversion Mortgages, the product becomes a viable solution for more customers.