MBA Hails Passage of Economic Stabilization Package, Tax Extenders

MBA (10/6/2008 ) Mechem, John; Sorohan, Mike
The Mortgage Bankers Association commended the House of Representatives' passage Friday of H.R. 1424, the Emergency Economic Stabilization Act of 2008. The bill, which establishes a program at the Treasury Department to purchase distressed mortgage-related assets, also includes extension of several tax provisions that will help steady the American economy.
The bill passed the house by a 263-171 vote (a similar bill, with fewer tax provisions, failed last week by a 228-205 vote). The same bill passed the Senate on Oct. 1 by a 75-24 vote and went to President Bush, who immediately signed the bill into law.

"The ongoing credit crunch has severely impacted the ability of individuals and businesses of all sizes to borrow, and has threatened to slow down the entire U.S. economy," said MBA Chief Operating Officer John Courson. "We very much appreciate the hard work and long hours that congressional and Administration negotiators have put in over the past several weeks and look forward to the quick implementation of the program. This will enable financial institutions to offer credit so individuals can purchase homes and other items and businesses can continue to operate and grow."

The bill will allow Treasury to purchase up to $700 billion in distressed mortgage-related assets from financial institutions in an effort to increase liquidity and restart the seized credit markets. MBA officials noted that the true long-term cost of the program could be far less than $700 billion, as Treasury has the discretion to redeem or sell assets, sometimes at a profit, when the market recovers.

The bill also temporarily increases the amount of deposit insurance provided for individuals by the Federal Deposit Insurance Corp. and National Credit Union Administration to $250,000.

Other provisions extend a number of tax provisions set to expire, including:

• Deductibility of forgiven mortgage debt;
• $1,000 property tax deduction for non-itemizing couples;
• Deductions for energy-efficient commercial buildings;
• Allowance for expensing of brownfields environmental remediation costs;
• Accelerated cost recovery for qualified leasehold improvements.

"These tax provisions are important to residential, multifamily and commercial borrowers and lenders and will encourage expansion in the real estate sector which can be the engine to drive economic growth in this country," Courson said. "A number of them are items that MBA has fought for over a number of years and we are pleased that Congress passed them before they expired."

Leaders in Congress expressed relief that the bill had passed, following a rebellion in the House earlier last week that led to the failure of the first version. House leaders needed to change 12 votes to ensure passage; as it were, the additional financial incentives provided in the rewritten bill enticed more than enough House members to switch their votes, although some, such as Rep. Zach Wamp, R-Tenn., said they would “hold their noses” as they voted in favor of the bill.

Treasury Secretary Henry Paulson Jr., who led the Administration’s efforts to pass the bill, said he would “move rapidly” to implement the new authority.

“The broad authorities in this legislation, when combined with existing regulatory authorities and resources, gives us the ability to protect and recapitalize our financial system as we work through the stresses in our credit markets,” Paulson said. “Transparency throughout this process will be important, and I look forward to providing regular updates as we move ahead to implement this strategy.”

Federal Reserve Chairman Ben Bernanke also expressed relief in the bill’s passage, saying the legislation is a “critical step toward stabilizing our financial markets and ensuring an uninterrupted flow of credit to households and businesses.”