Further, under current tax rules, only homeowners who itemize deductions are eligible to deduct property and state taxes. The act creates a new standard deduction of $1,000 for married homeowners and $500 for single homeowners, which will be available for the 1040EZ tax form.

Licensing changes

The mortgage-reform bill also addresses originator regulation. Many offenders in the industry took advantage of the vagaries of licensing -- or lack of it -- among different states and markets.

Anyone that originates mortgages, including depository originators, will require licensing, registration and a unique identifier number assigned by the National Mortgage Licensing System.

The law will not pre-empt state-licensing laws, but it will establish minimum standards that states must achieve within two years. For states without current licensing or registration regulations, the legislation provides for management through the licensing system.

GSE oversight

The housing bill included creation of the FHFA to corral regulatory oversight of the GSEs. This "new" regulator would establish minimum and risk-based capital requirements to ensure that the GSEs remain sufficiently leveraged. This agency's takeover of the two companies has significant impact on the mortgage and housing industries.

Pre-conservatorship, the GSEs enjoyed positions as "quasi-governmental" corporations with shareholders and dividends, yet they were backed by the federal government. They owned or guaranteed nearly half of all U.S. mortgages -- $5 trillion worth. They had huge executive salaries, huge shareholder dividends and a huge lobbying budget: $117 million over the past 10 years. Lobbying is proscribed for actual government agencies.

The quasi-governmental side of the GSEs enjoyed a qualifier for investors, inferring that the companies were "backed" by the U.S. government, allowing them to maintain inflated investment ratings unsupported by their financials. The corporation side of the GSEs was dividend-driven, taking greater risks with investment.

Those risks were compounded by the wave of foreclosures, plummeting stock value and home depreciation, leaving both companies insolvent or close to it.

Under the FHFA's authority, the U.S. Department of the Treasury will guarantee the net worth of the former GSEs and open an "ultimate liquidity backstop" line of credit to them and the federal home-loan banks through the Fed until those authorities expire in December 2009. In addition, the Fed will guarantee the financial and operation solvency of Fannie and Freddie through massive purchases of "special" preferred stock.

With all its changes, only time will tell if the Housing and Economic Recovery Act has gone far enough or perhaps too far in creating a remedy for the mortgage credit crisis. For now, mortgage professionals are all probably best-served by watching closely and educating themselves on the emerging new world of the mortgage industry.

Ruth Lee is vice president of sales at Colorado-based back-office outsource provider Titan Lenders Corp. Previously, she was owner and operator of a successful residential mortgage company for 10 years, including managing more than 60 loan officers in six states. She advises customers on business issues ranging from sales staffing and training to investor and vendor selection. Contact her at ruth.lee@titanlenderscorp.com or (720) 279-7279.

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